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Buy on Apple's Dip Ahead of Earnings

Stocks in this article: AAPL GOOG

After falling 6.5%, investors can be forgiven for scratching their heads and wondering how much more they need to endure. One strategic solution, especially attractive in front of earnings, is writing calls against some shares. Premiums are high as volatility (time premium) increases in front of the earnings release.

Obviously, I am bullish with Apple, but I haven't always been, and I am not an iFanatic with Apple's products (I own a Samsung S3). I rate Apple positively simply on the numbers, and the numbers are attractive.

The last reported short interest is paltry and without reason to consider it a meaningful influence at only 1.6% of the average trading float.

Google's (GOOG) miss shook the market, and shortages in availability of the iPhone 5 have many questioning if Apple can hit their numbers or not. What is missed in this conversation is it doesn't matter what the numbers are for the last quarter (within reason), because everyone with a finger on the buy and sell buttons during the earnings call will have their full attention on what to anticipate beyond 2012.

Questions related to supply and availability of the iPhone 5 are plaguing shares as if extreme customer demand for your high-margin product is a bad thing. People used to buy iPhones that couldn't make a phone call, and the status of the iPhone hasn't lost its luster. Count on Apple selling every last iStatus symbol it can produce until it is ready to release the next in the series.

I am leaning towards the upper end of the estimates and believe Apple blows the sliding doors off the minivan. I believe Apple delivers above the mean estimate. More important, I believe Apple rallies after the earnings are out as investors put risk back on.

Apple has been the "buy on dips" stock for several years, with good reason. The current dip will once again prove that those sitting on the sidelines should have jumped on board for the next $100 in gains. AAPL Revenue Quarterly Chart AAPL Revenue Quarterly data by YCharts




At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

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