$76,103 – That's not sales, that's profit!
Every minute of every day, AAPL is making $76,103 (at $40Bn a year) on the sale of $316,120 worth of products. No company on Earth comes close to that kind of metric and, overall, the stock's performance clearly indicates that but, if you listen to the MSM, you would think AAPL is finished.
We had a nice, in-depth discussion about AAPL in Member Chat this morning and we not only concluded it's still a buy but we came up with a lovely spread that has the potential to turn $3,000 into $45,000 between now and Jan 2015 if AAPL simply holds $600 – needless to say we're very proud of that as it's always nice to have a trade or two in your portfolio that returns 1,500% and we rarely get a chance to do them with a blue-chip stock like AAPL.
Note in the above chart, that AAPL is still a relative outperformer this year – shown priced against HPQ, DELL, INTC, IBM, CAT and ISRG – all good companies that have simply failed to keep up. We also like HPQ at this level, now $14.30 as their REDUCED guidance has them earning $3.62 per share next year after earning $4.05 this year and that's still 25% back on your money, which sure beats TBills and we're not even counting the $18Bn in cash they have on hand, which is quite a lot when you consider that their entire market cap is now just $28Bn. Small wonder HPQ spent $9Bn buying back their own stock last year, when it was priced 100% higher.
HPQ is a pretty good candidate for a buy/write, where we Buy the stock for $14.30 and Write 2014 $15 puts and calls (sell short) for $5.50 and that nets $8.80 on the trade and, if HPQ is below $15 in Jan 2014, then another round of shares will be put to you at $15 for an average entry on 2x of $11.90, which is 17% below the current price and, if HPQ is over $15 in 16 months, then you get called away at $15 for a $6.20 profit on cash (75%). Buy/writes are our favorite tools for making long-term entries – see "How to Buy a Stock for a 15-20% Discount."
As we mentioned INTC in the above chart, let's look at a similar trade idea for them. INTC is nicely beaten-down at $22 but may go down to $17.50 before stabilizing so this is a bit early but we can buy the stock for $22 and sell the 2015 $20 calls for $3.70 and the $15 puts for $1.50 and that drops the net entry to $16.80, which is 23.6% off the current price and lower than we think it's likely to fall and we're only committing to buying another round at $15, and that's 32% off the current price, which would give us an average entry of $15.90 – worst case. If called away at $20, our gain is $3.20 of our net cash investment of $16.80 or 19% over 28 months – not a bad return for betting Intel simply doesn't fall more than 10% lower than it is now but nowhere near as exciting as HPQ because it's considered less risky and we're being more cautious as we don't think it's bottomed yet. INTC is also kind enough to pay you a .90 dividend while you wait – adding another 5.3% to your annual return! This is better than T-Bills folks…
Now, back to the markets. As we can see from our Big Chart, we're having a bit of a pullback, with the Nasdaq and Russell down 5% from the September highs and the other indices down roughly 2.5% so far.
The Nasdaq made a critical failure yesterday as it fell below it's 2.5% line AND it's 50 dma at 3,082 while the Russell is right on their 50 dma at 824 and in danger of failing their 2.5% line at 820 as well. The S&P is our most important indicator and it looks like they are right on that critical 5% line at 1,440 – our only index not to fail that level and that is all of our remaining hope so we'll be watching them VERY closely this week.
Should the S&P fail – then the Dow has no support down to 13,295 so they'll make a nice short but we're still hoping we won't have to pull the trigger on that one. Going into this dip, TZA was our primary hedge in the Income Portfolio and our April $15s have gained .40 since Friday (16%), well outpacing the 2.5% drop in the Russell for a nice offset.
Otherwise, we're still long-term bullish as nobody notified us that the Fed has withdrawn QE3 and it was just yesterday that China threw another $40Bn into the markets. What's bumming everyone out this week is worries about earnings (not so bad so far) and all these TERRIBLE pronouncements from the IMF's meeting in Tokyo this week on the state of the Global Economy. At PSW, we've been telling you the Global Economy sucks for months so it's not surprising to us but it seems to be shocking the sheeple – who are now running for the exits but, as noted on the Big Chart – certainly not at anything like an alarming pace so far.
In order to climb a wall of worry, we need to first recognize and accept those worries and what we have here is the beginnings of capitulation after a very long period of denial (where bad news was good news into the Fed). This is why we prefer to buy now with a 20% downside cushion – we're a little early to call it a bottom but the FACT of QE3 means we may not make too low of a trough on the way down so we're using this earnings season to do a little bargain hunting.
Tell us when something new happens that we should be worried about but, so far, China's slowdown we've been discussing all year, Europe's mess is 2-years and counting, California Cities in debt crisis also old news, Japan staggering under 220% debt is bad, but just 10% worse than 2 years ago and 7.8% US Unemployment is the best reading since Obama took office and the only thing we have to worry about there is whether or not Jack Welch's head will explode if we go down to 7.7% next month.
So far, earnings are coming in better than expected – we'll see how the week plays out but this correction may be shallow indeed if it turns out we've underestimated the recovery in the US and overestimated the impact of China and Europe slowing down.
Apple $1000: Why it’s time to buy – Bullish Cross
Good Morning everyone — last night ES touched the bottom of the channel from 1262 looks like our halloween run is gonna get started.
AAPL also touched the 5/22 to 7/26 and stopped right to the tick. Time to test the top of the channel at 670 .
R3 – 97.05
R2 – 94.98
R1 – 93.43
PP – 91.36
S1 – 89.81
S2 – 87.74
S3 – 86.19
Yesterday's high and low – 92.91 / 89.29
The only interesting earning today was COST and they beat by $0.09 at $1.39/share. That's up 27% from last year's Q4. Revenues were up 14% compared to last year as well. They are indicated higher this morning.
They are not cheap at almost 28x earnings. Target and Wal-Mart trade at around 15x. On the other hand, they are cheaper than Target if you factor in growth with the PEG ration at 2.34 compared to 3.8 for Target (Wal-Mart is at 1.6 so pretty cheap it seems). Price/Sales is relatively close although COST is again cheaper.
IMAX initiated with an Outperform at Credit Suisse: Target $28
Momentum Block Update:
"Momentum indicators for equities around the globe are in sell mode, however, momentum in currencies market has improved overnight; three best players in this category (AUDJPY, AUDUSD, and USDCAD) are now in buy zone. Since these tend to lead the change in trend in equities, current correction may be near its end."
9 years in Iraq was worth it! I just read that Russia signed a new $4.2B weapon deal with Iraq and that Lukoil and Gazprom are getting big oil projects there…
The weekly FAS calls look pretty safe…
PHARMBOY What do you think about QCOR? Would you stay away from a one product company or are they attractive at this level? Thanks for your thoughts and all you do for us here on PSW
Phil, I am sitting on a OCT DIA 136 long call that i'm considering rolling to try to save this play. I don't see DIA getting back to 136 in the next few months, but based on long term optimism how far out would you suggest rolling if at all? Do you think is is worth it or should i consider it lost. Thanks for your advice.
SPX/Phil – lost 1440..
My "swag" on the lows before the next move up….ES 1365… AAPL 575….. 🙂
im short the 10x oct fls120 and long the 135's. it the son of the sep trade that went awry.
the trade sits at about a -8k
since this is the week before exp i was wondering what if there were some rules of thumb to keep in mind and what your thoughts would be as to a positive role scenario………
AAPL – Net $33.70 excluding this week's sale.
AMZN – Net $11.18 excluding this week's sale.
Morning all….As my frontal lobotomy is in the healing process, I watched CNBC this morning. Did Sorkin walk off the set? He had clearly had enough of Kiernan's antics, which have gone beyond any reason. Point #2, early in the show they announced a Welch rebuttal appearance, but never delivered nor explained. Maybe I just missed it… Enough of this, time to focus on the day ahead.
QCOR/wil -we are in the sold puts. Oct 21s and Jan 15s. I like the Jan for now, but they have already moved a bit. I would not buy any stock in here JIC the gov't hits them due to 'false' advertising/claims. As for the sales/insurance fiasco…I am not worried about it, as the drug works, and payers will scream when they have a child that needs the drug.
mjjwo9b/brain You're lucky you didn't need a broom and a dustpan….. 😉
I watch Bloomberg until 6am pst…..
The MoMo portfolio is in cash now with about $28K.
AMRN – buying a few Oct 10 puts. FDA ruling on exclusivity of their 'fish oil'. Let's say that they have issues with their 'exclusivity', as GSK has the same thing, just not as pure . Now, this is a gamble, but one that I think is worth it…small, gamble…and I am usually wrong!
We had yet another discussion on why I like AAPL this morning so worth a read and the new trade idea for them is:
Dollar holding 80 so far but if it falls below we can get a serious move back up in stocks and commodities. The Euro is down at $1.2884 so we need that to cross over $1.29 and the Pound ($1.6013) needs to hold $1.60.
Oil is at $92.31 and should rise into inventories but $93 has been an excellent shorting spot for /CL so let's keep an eye on that one.
Still a lot of negative pressure and we're watching that S&P 1,440 line like a hawk (failing at open) as we need to get more defensive if that's breaking. Expect the weakness to last at least until Europe closes as they are freaking out about the IMF meeting and also about Spain – who refuse to be bailed out and raise all sorts of questions on the Euro's ability to last.
At the open: Dow -0.12% to 13458. S&P -0.04% to 1441. Nasdaq -0.01% to 3065.
Treasurys: 30-year -0.32%. 10-yr -0.13%. 5-yr -0.06%.
Commodities: Crude -0.09% to $92.31. Gold -0.19% to $1761.65.
Currencies: Euro -0.02% vs. dollar. Yen +0.07%. Pound -0.1%.
Market preview: U.S. stock futures struggle for direction as earnings seasons gets underway with Alcoa's (-1.1%) mixed results late yesterday. The S&P benchmark is flat while Nasdaq futures are+0.1%. Yum Brands is +4.6% following rather tasty results and FedExpress is +3.1% as it reveals a $1.7B "profitability improvement" plan. Later: Wholesale Trade, Fed's Beige Book, Fed Speak
Welch / mjj – I wonder what he would say – the guy cut 100,000 jobs while at GE and manipulated earning reports (later caught by the SEC). Not the poster child of CEO behavior…
When is the iPad announcement supposed to be? Today? Any time?
I read somewhere it was the 17th or is that the release date?
BA – Phil can you recommend long term play on BA? I'm thinking about initiating a position in my IRA account. I like the buy/write plays, but the naked put eats up a lot of margin in the IRA account. TIA
Oil inventory report / Phil – I believe that this week the inventory report is tomorrow at 11:00 AM because of the holiday. At least that's what they have at Bloomberg.
COST – how much of their sales were due to gas ……???? I have not looked into the books yet, but my guess is a bunch comes from there.
Welch et al: The best advice for Jack is to put the iPhone down. His assistant should cancel his data plan. The sad deal for these corporate narcissists is all they focus on is their big ol' wave when it hit the beach. Unfortunately, as it recedes back into the ocean, we are left with the flotsam to pick through. I'm not a Jack fan, but I have moved on and find him kind of weird to listen too. Dan Lyons hit it on the head a few years back: http://www.fakesteve.net/2008/04/bob-metcalfe-and-one-pair-of-glasses.html
CELG Oct/Jan 75 calendar is coming back in with the move down on them. Once the Octs hit $2, I will roll them most likely to the Nov 75s, as there is now a H&S forming on the daily chart.
Phil—are you bullish yet??? 😉
SGEN – adding to the Mar 30/35 BCS for 75c, selling the Mar 20s for 1.20 or better. That is 45c credit.
How the F#CK is oil still going up!?!?! What a crock of sheeeet! Im shorting…
Does anyone recall what we got out of GLL $14 calls for?
GLL / David – $0.40 on 10/2.
25KP – The 640 calls hit $8.50 so 2 of them are gone!
AAPL $1,000/Diamond – I like this p/e chart!
AAPL/Amit – That's why I'm worried about the covers – virtually no upside resistance once it gets going.
COST/StJ – I keep waiting for them to get cheaper but they never do. That membership fee is brilliant. 55M members and their total income is "just" $1.5Bn so a $10 rise in fees drops $550M to the bottom line any time they want to…
Dollar holding 80 despite Euro and Pound improving – perhaps a little Yentervention is to blame….
Iraq/StJ – Making the world safe for Russian Capitalism….
DIA/Hemas – It's just .35. If you really want to roll it, I'd sell the same calls to someone else and roll to the Nov $138s at .60 so you drop your net by .10 and now you have a reasonable spread to get a longer look without spending money. If we have 2 good weeks of earnings, this market could take off sooner than you think.
SPX/Scott – Yes but barely. Have to give them a chance. RUT needs to confirm at 824 and Dow 13,400 should fail too.
FLS/Mill – Well they're at $128 so you already used up all the premium on your short $120s (now $8.60) and I suppose you are in a bear call spread (which I hate for exactly this reason) and totally screwed as your $135s are just .20 so it's really a matter of whether or not you want to push this short naked with earnings on the 29th but I'd just roll the calls to the Nov $125s ($6.60) and eat the $2 for now in exchange for selling $3.30 of premium and then your roll is to the Jan $130s (now $6) but they are not terribly expensive so I don't know why you're short in the first place.
Sorkin/Mjj – I didn't even notice. I tend to tune those guys out – just want to hear if any breaking news. If Bloomie didn't ignore breaking news (other than the ticker) I'd never watch CNBC. Welch is simply becoming a fool – maybe he finally realizes it after getting feedback on today's WSJ piece.
Bloomberg/1020 – That's what I wake up to, I only switch on CNBC when I don't have time to look anymore.
IPad announcement/Zip – It was originally rumored for today with a 10/17 launch but now no one is sure but they say the weekend for sure.
Oil inventory/StJ – You're right. What BS, that was not much of a holiday. No wonder they popped $93.
COST/Pharm – Lots of gas sales but usually a loss-leader for them as they really try to pass it straight through to Members.
Welch/MJJ – I'm always amazed when guys like that run around using up their reputation with nonsense. You would think they would be smart enough to know it's the only thing they have left…
Oil/Jrom – No inventory until tomorrow means they can push it today without fear.
CNBC Pushing /CL to 97. Cheerleaders!
AAPL//fyi…went to aapl store IN CT yesterday at around 5pm…it was the most empty ive ever seen it…including periods when they aren't releasing new products…and most of the people in the store were around the computers….very few around iphone 5…i was just concerned about aapl technicals…now im actually worried about fundies for first time in many years…its only one visit…so im going back this weekend…but it was worrisome…im worried that the phone just isn't a big enough upgrade to entice as many people as expected given growing competition….they are advertising the EARBUDS! that is a red flag….i have the stock hedged with puts…and i was planning to take them off before earnings…but i may wait until after report…havent decided yet….im going back to mall this weekend just to make sure it wasnt aberration….that shopping center is biggest in our region…so people come from other states to it….it does matter.
That's pretty amazing:
I guess better than depending on Russian rockets for resupply.
DD on QQQ again for .05c?
Oil pinged R1 right on the nose…
To be clear: Own 3 AAPL spreads, and selling 1 weekly call, a $655 for 100 weeksl? 3 to 1?
Pharm/ ZLCS, is it time to accumulate?
Phil/ SVU is it time to accumulate?
American Spending Habits [INFOGRAPHIC]
COST/Phil – Asians here in LA love Costco, and I'm aware of a Costco in Seoul – a little inconvenient since they built it for car access rather than subway, but they love it in Seoul as well as in LA. It's a solid alternative to the usual price-gougey US imports.
YRCW – Blankfein must be trading YRCW..
FYI. The 25k portfolio shows 8 $640 calls sold.
$25KP: Well, AAPL $15 off the bottom and $640 may be a tough nut to crack so let's keep an eye on selling 6 of the $640 calls for no less than $7 (now $8) as we can always roll them up to 10 $650s (now $3.75) and we'll be happy enough at $660 that we won't mind the loss.
$25KP – Covers triggered on AAPL and done with TNA calls at $2.40. Just no strength here.
COST/snow: Yep. Costco in Japan is the same. Its like going to an "American" theme-park. All kinds of stuff from the States in GIGANTIC sizes. People who go there for the 1st time always ooooh and aaaah at all the crazy jumbo-sized merchandise we take for granted. Lots of fun though. There are Japanese fan-blogs on the web describing all the wacky merchandise and deals.
I always go when I feel a little homesick and its rainy, or have a need to buy multi-vitamins and Splenda in bulk.