Apple (AAPL) declines more than 3 percent while the broader markets rally more than 1 percent. At last, a recent influx of negative sentiment towards Apple. We have the following:
- Consumer Reports not recommending the Apple iPhone 4 because of technical issues resulting in signal loss if the smart phone is held in a particular way
- Competition – but who cares about competition, this is Apple (please notice my sarcasm)
My point is very general. For those who have read books like The Big Short or Fooled by Randomness, we know that unexpected events have crippled investors and those investors have always acted naïve as they have overlooked what they think are such rare situations, which interestingly, become common sense after they occur.
Who thought that there would be any problem with Apple’s new iPhone 4? Are analysts really in any position to assure the public that similar problems will not happen again?
What analysts who cover Apple or investors who own Apple will even mention the possibility of Apple losing market share to rivals such as Dell (DELL), Google (GOOG), and Sprint (S), among other companies down the road, and that at some point in the future, it is possible that the iPhone loses its edge?
My biggest concern is that Apple’s market cap dwindles as a result of investors overlooking the influx of other non-Apple products equivalent to the iPhones and iPods into the market and rather anticipating that Apple’s share value will realistically reflect competition throughout time, Apple will, at some point in the future, surprise during some quarter, only not to the upside. Either way, downgrades would then follow, and the ardor for Apple will shift towards another player, as history shows us, prevalently happens.
I am eager to buy puts on Apple expiring out in 2013, primarily because my catalyst carries a longer-term theme. I will not commit significant capital to outright short the company as it could easily be very burdensome and must wait until September 13, or when the equity LEAPS are added to make my move.
Full Disclosure: No Positions.
