Tags: Kass | Apple | margins | tech

Doug Kass: Apple Shares Represent a 'Value Trap'

Thursday, 19 Sep 2013 08:03 AM

By Dan Weil

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While Apple's stock has dropped 35 percent from its record high about a year ago and 10 percent from just last Monday, it's still not a buy, says hedge fund manager Doug Kass, president of Seabreeze Partners.

"Apple has become a value trap," he told CNBC. "This is a company with no growth and profit margins that are way too high vis a vis the competition."

Kass apparently wasn't impressed with Apple's introduction of new phones last week.

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"A year ago, Apple was selling a superior product and was charging a premium price," Kass explained. "Now, they're selling a less-than-superior product, and still charging a premium price."

That means "profit margins have no place to go but down," he said.

Investors got overexcited about Apple on its way up, Kass argued. "The bulls took a lot for granted in terms of extrapolating the company's growth, and now reality is setting in."

Apple closed Tuesday at $455.32, and reached its zenith of $705.07 in September 2012.

Now it's "close to fairly priced," Kass stated. "For the foreseeable future, it will move 50 points up or 50 points down."

Sean Hyman, editor of "Ultimate Wealth Report," a Newsmax newsletter, is more enthusiastic about the technology titan. "The Apple story is still alive," he told Newsmax TV in an exclusive interview.

"You go through points where investors are a little more thrilled with it and when they're not. But really Apple has turned a corner back to the upside, and the future is really a lot brighter than most investors believe."

David Nelson, chief strategist of Belpointe Asset Management and a Moneynews contributor, wrote in his blog that the fundamentals of the company have changed, as the iPhone is now a dominant part of the business.

"Apple is no longer a tech company or a proxy for the tech sector. It is the iPhone company," Nelson explained. "[Apple CEO Tim] Cook and his team are trying to defend margins in a world drowning in new devices. The iPhones are certainly a premier product, but the rest of the world has made their presence known and it will be virtually impossible for the firm to maintain their margin structure without giving up market share."

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