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Apple Doesn't Suck -- but Its Stock Does

Stocks in this article: AAPL

As an investor, though, the only thing that determines your success is the stock.

And right now, Apple's stock sucks.

>>5 Toxic Stocks You Should Sell in February

For starters, it's expensive. With highs above $700, this stock's price tag has a big psychological impact on the people buying and selling it. Never mind the fact that stock prices are completely meaningless 99% of the time - for many investors, a $700 stock (or a $460 stock, for that matter) can't possibly be a "value" stock.

Another problem for AAPL is that everyone owns it.

Despite its fall, AAPL is still the biggest publicly traded firm in the world by market capitalization. Combined with the conspicuous rally the firm has enjoyed post-Great Recession, ownership rates in this stock have gone through the roof. At one point, more than 20% of mutual funds owned shares of AAPL -- and around 17% of individual retail investors did too. When one-in-five of your friends owns a stock, you've got good reason to start getting concerned.

Last Fall, after Apple hit the $700 mark, the early profit-takers spurred on the more anxious owners in a positive feedback loop that sent shares lower. That consistent excess of supply of shares in AAPL is what has caused the downtrend in this stock that's been in force for months now. And until buyers remain more eager to jump back in than sellers are to escape a falling stock, that's not going to change.

At the end of the day, it all comes down to this: Apple is a seriously cheap company right now, but it's got a broken stock. Until the technical get fixed, it makes sense to stand clear.

In the last handful of trading sessions, Apple has managed to consolidate. At this point, though, it's unclear if sellers are taking a breather before plunging the stock even lower, or if we're seeing early signs of a bottom. In the short-term, I think a breakout above this recent range presents a decent buying opportunity for more-nimble traders; that happens on a move above $460.

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