NEW YORK (TheStreet) -- In late August, I wrote a blog post disclosing a halving of our Apple (AAPL) position by selling half of our shares in the iShares US DJ Technology Sector Index Fund (IYW) and replacing it with the First Trust Technology Dividend Index Fund (TDIV).
IYW had roughly a 25% weighting in AAPL and TDIV has no exposure. The ETF swap took our portfolio weight from about 4% down to 2%.
The logic behind the trade was based primarily on sentiment indicators, weighing how over-owned the stock was, the almost cultish mania surrounding the name, the difficulty most stocks have when they become the largest company in the world, other than Exxon Mobil (XOM), and from a more technical perspective the parabolic arc of the share price during the summer.
In terms of pushback on the sale, there were a lot of negative comments on the blog post disclosing the trade and in the various places where my blog is syndicated. It was clear that people loved the stock and did not want to read something with a negative outlook on "their" stock. Since then, the sentiment toward the stock has turned around completely and the stock has dropped approximately 20% from its $705 high in September. With the stock down about 20% and sentiment having turned, we bought back the 2% we sold in August for the separate accounts we manage and for the AdvisorShares Global Alpha & Beta ETF (RRGR) that our firm subadvises. On this go around we simply bought the stock directly as opposed to undoing the ETF swap from August. I had hoped I would get a chance to buy the stock if it ended up falling and that is how it played out. Buying AAPL the day after the election during something of a panic will either turn out to be a good trade or not. With the sale, there was no expectation of top ticking it. With the buy Wednesday, there is no expectation of bottom ticking it.
The company was a world-class company with products that inspire almost cultish devotion when we reduced our position and is a world-class company today even having dropped 20%. It is logical to expect pushback on buying when sentiment has turned, and the period after a stock has fallen out of favor is often a good time to buy. The point here is not necessarily about whether to buy Apple or not but to understand that on the way up, when things can't get better, it is probably a good time to sell or at least reduce a position. Conversely a 20% decline in a month or two without meaningful changes to the fundamentals is probably a good time to buy. At the time of publication, the author had AAPL and IYW as client holdings. RRGR was a client and personal holding. Follow @randomroger This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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