Apple (AAPL)
Price 445.15 (on 5/24 close)
Moat (eroding); Fair value (600); yield=2.49%
What is my take on Apple ? I think the fair market value of 600 on this stock is conservative given its global opportunities even with existing businesses and hoardes of cash. As a researcher myself, I can't subscribe to the dumb thought that their innovators will stop inventing great things, or that the passing away of one man can change all that much in that sphere. As long as key inventors in the company stay on, this ship will right itself.
But on the negative side, the volatility of this stock requires one to have a strong stomach. Of late, it is like almost every publication and analyst is against Apple probably demonstrating a herd mentality of their own. Do we stay away and miss what seems to be a long term bonanza with high short term risk or do we jump in? That is the real question.
My take has been this. This is not a stock for the faint hearted or for someone who cannot think in terms of a multiple of 100 shares and cannot hedge with stock options. A play that makes sense to me today is:
A covered PUT at strike 450 for April 2014 priced today at 52.25
If it doesn't get exercised, you make a good percentage return on money parked. If it does, then you bought it at an effective price under 400 at which I think it is a steal even if you consider some worst case scenarios one can think of. Add to this the fact that there is buying going on, some appearing to make sure it doesn't go below 425 which appears to be forming as a strong support.
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