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Is It Time To Dump Apple?

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The past week has been a little less than exciting on Wall Street. Stocks have been flat or mildly down every day for the past week. It's the sort of market that would lull a day trader to sleep.

Not that I'm complaining. 2012 has been another roller coaster of a year, and a little sideways movement is welcome now and then. These sorts of mild corrections are exactly what we should expect in the midst of a fourth-quarter rally, and we should use them as opportunities to put new monies to work or to rebalance our portfolio holdings.

MACRO INPUTS
For the past month, my position has been clear: coordinated central bank easing by the Fed, the European Central Bank, the Bank of Japan and even smaller banks like the Swiss National Bank all but guarantee a sustained rally in risk assets. In this sort of environment, corrections--when they come--will tend to me mild and characterized more by sideways movement than steep losses.

But while I remain bullish, I want to shift the topic away from "what to buy" to "what to potentially run away from."

WELL OFF ITS HIGH
At the top of my list is Apple (AAPL). Apple is "officially" in a correction, for market technicians who like to split hairs over that sort of thing. At time of writing the stock was 11% below its all-time high.

BE REALISTIC
I do not foresee a dramatic crash in Apple's near future, but I think investors have to be realistic about the company's prospects going forward.

Yes, Apple is selling more iPhones than ever. But the "wow" factor just doesn't seem to be there like it used to be; it's getting harder for Apple to surprise us. The patent wars notwithstanding, Samsung seems to be getting more buzz, and Apple's competitive advantages would seem to lack the "moat" that long-term investors like to see.

FLIPPING THE SWITCH OFF
I hesitate to put too much emphasis on anecdotal evidence, but earlier today and old-friend who has been an Apple cultist for years texted me to let me know he had decided to shut off his iPhone. It just didn't excite him like it used to, and he couldn't justify the $100 monthly bills. This is a high-income urban yuppie who has paid a premium for Apple products for years. Until now.

Looking at more concrete data, Apple has swollen to be the largest stock in several stock indices, and it may be the most over-owned stock in history by retail investors. According to SigFig, 17% of all investors own shares of Apple, and four times more investors own Apple than the average stock in the Dow Industrials.

Professionals are equally bullish--97% of Wall Street strategists rate the stock a "buy."
I admit that Apple is cheap at just 14 times earnings. Yet I do not believe that the gains of recent years are sustainable. I just don't see where the buyers are going to come from, frankly.

MAYBE JUST LOOK ELSEWHERE
I hesitate to recommend shorting Apple just yet, and I see no immediate catalyst for a crash. But I do believe that investors can find better opportunities elsewhere.

Disclosures: Sizemore Capital has no position in any security mentioned.

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Visitor - Gordonpo: Thank heaven for sceptics like this author. For core owners of AAPL who trade around it this type of commentary makes the market for us. For years now there have been similar "suggestions" to short AAPL: At $60, $200, $300, $400 and again now at $630. Unlike Kass most go silent as assuredly they will be proved wrong. Kass just keeps coming back for more. The negativity when they launched the 4s was similar and look what happened there! Analysts are not to be blindly followed but 99% can't be deluded to project 1 year ahead at $780.
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Marmadukemark1: I found your article to be vapid, and any facts you provided (i.e. it's cheap, popular, and highly rated) seem to be contrary to the slant you have. I have equally bullish anecdotal evidence. I know of lots of places where buyers are coming from, and from where they are going to come. While I will may not add to my position I am certainly not going to dump the one I have. I suspect your perception of a lack of a "wow" factor may be simply Apple fatigue.
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Visitor - cfm: Seriously, Apple accounts for half of all profits in the Fortune 500, it is still growing (despite its lack of "Wow") profits and revenue at greater than 30% y/y. It currently trades at a ridiculous PEG, despite naysayers like you, a year from now Apple stock will have returned more than any other investment you can point to.
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About the Author

CharlesSizemore

Charles Lewis Sizemore, CFA, founder and editor of Macro Trend Investor (formerly The Sizemore Investment Letter), is dedicated to finding superior investments backed by powerful macro trends—before you hear about them on the nightly news or read about them in the newspaper or on the Internet. He has been a frequent guest on Bloomberg TV and Fox Business News, has been quoted in Barron’s Magazine, The Wall Street Journal,and The Washington Post and is a frequent contributor to Forbes Moneybuilder, GuruFocus, MarketWatch and InvestorPlace.com.

Charles is the co-author of Boom or Bust: Understanding and Profiting from a Changing Consumer Economy (iUniverse, 2008); and worked alongside best-selling financial author and economic strategist Harry S. Dent, Jr. in creating original research on the effects of changing global demographics on asset returns and economic growth. He also serves as the Chief Investment Officer of Sizemore Capital Management LLC,  a registered investment advisor.

His academic and real-life experience has given him a unique approach to investing: combining his insights into global macro trends with in-depth investor research. And he has developed a reputation for taking complex issues, recognizing long-term investment strategies, and then finding the hidden investing opportunities that he shares with investors.

Charles holds a master’s degree in Finance and Accounting from the London School of Economics in the United Kingdom and a Bachelor of Business Administration in Finance with an International Emphasis from Texas Christian University in Fort Worth, Texas, where he graduated Magna Cum Laude and as a Phi Beta Kappa scholar.

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