One of the habits of many investors in a losing position is searching on the Internet for reasons why their position is still a good stock to own. I find this trait in investors and traders alike.
I have little doubt that there are many Apple investors that have held their shares much longer than they had originally planned to hold, waiting to "get even." If you want to learn more about Behavioral Finance and why you make the investing decisions you do, I suggest you get a copy of a brilliant book titled Behavioral Finance: Understanding the Social, Cognitive and Economic Debates from Wiley Finance, written by Edwin Burton and Sunit Shah. That's as good of a place to understand your money and your mind as any.
I have written previous articles with a focus on behavioral finance, but in this article we are going to focus on Apple, and why I'm not backing away from my optimistic stance. My friend and fellow TheStreet contributor Richard Saintvilus wrote an amusingly titled article I'm Holding Apple Under $400 (and I'm so Ashamed)I like the way Saintvilus points out the differences between Apple, Microsoft (MSFT - Get Report), Dell (DELL - Get Report) and Texas Instruments (TXN - Get Report). Based on profitability, free cash flow and stability, Apple is the best value stock among them.
Best value is another way of saying dirt cheap and Apple shareholders are clearly tired of owning an ever increasingly dirt cheap stock. Tim Cook finger-pointing and disappointment are the hallmarks of many Apple articles. TheStreet's Rocco Pendola wrote an article that sums up his opinion of Cook's performance as CEO If Apple Bought Twitter It Would Ruin It. I will admit I laughed when I read the title, but I also consider Pendola a friend and laughing was more about Pendola's writing creativity than believing it was true. Pendola's exceptional creativity aside, Pendola has made it crystal clear he isn't Tim Cook's fan club president. However, Pendola should give credit where credit is due. Apple is not running into the ground; it recently reported one more in a long run of record earnings.
By my last count, Apple sold $54.5 billion worth of goods in the fourth quarter of 2012 while managing to keep $13 billion in its pocket. If that is considered running Apple into the ground, I welcome Tim Cook to take over my household and run my family into the ground at his earliest convenience. I understand Saintvilus' response of despair. I can think of many more pleasant topics of conversation with friends and peers other than a stock holding that I'm underwater in. Everyone is an "expert" on Apple's stock and the direction the stock has already made. I'm sure Saintvilus has received his fair share of "experts" telling him why he should have sold at the "obvious exit price" of $705, but I am equally sure Saintvilus has learned to tune most of it out. I, on the other hand, maintain a bullish opinion of Apple, but typically don't own it. As an active trader, I usually don't position into stocks over $100. My edge diminishes as the price increases much beyond $100 per share. I rely on price movement to gain an advantage, and stocks over $100 don't have the same characteristics as stocks under $60.