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5 Reasons Apple's Stock Is in Secular Decline

Stocks in this article: AAPL ^GSPC ^IXIC SPY QQQ

5. The demoralization of Apple. It's tough coming off the kind of euphoric emotional high that Apple's employees and investors have been on for the past few years. Internally, the relentless decline in Apple's stock is demoralizing to employees -- not only the ones that have stock options.

Furthermore, the increasing media questioning of its CEO and other executives will also take its toll on the troops. Apple is already suffering defections of key talent and this is only likely to accelerate as Apple loses some of its "hip" factor and starts to be perceived as a more pedestrian type of company.

Investors will also gradually suffer demoralization as Apple's stock is knocked off its pedestal as a "growth stock" and a "concept stock" and becomes more of a deep value play that people pick up because it's apparently cheap rather than because the company is growing its earnings at an exciting rate.

Conclusion: In many ways, Apple is a victim of its own spectacular successes. Far too many people expected Apple's golden age was never going to be interrupted. However, realistically, no consumer electronics company can sustain 40%+ gross margins forever. And no one company can revolutionize the consumer electronics business year after year.

Apple employees and investors are in the early stages of a major psychological transition. As general expectations come back to earth, a hangover effect will set in. This will affect not only the price of the stock but also Apple's operations.

The hangover is ironic. Apple is a company that is, in many ways, still in the midst of a secular upswing if you analyze it in terms of the penetration of its products into the global economy and its impact on peoples' lives around the world.

Yet, as a stock, Apple is in a midst of a secular decline that can probably only be counteracted by the introduction of a revolutionary new product line. Such an apparition could occur, but I personally do not expect it to occur in time to prevent Apple's stock from declining to $350 or below.

Investors should note that the secular decline of the world's most important stock will almost inevitably have consequences for broad indexes such as the S&P 500 and the Nasdaq and index ETFs such as SPDR S&P 500 (SPY) and Powershares QQQ (QQQ).

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.

James Kostohryz has accumulated over twenty years of experience investing and trading virtually every asset class across the globe.

Kostohryz started his investment career as an analyst at one of the US's largest asset management firms covering sectors as diverse as emerging markets, banking, energy, construction, real estate, metals and mining. Later, Kostohryz became Chief Global Strategist and Head of International investments for a major investment bank. Kostohryz currently manages his own investment firm, specializing in proprietary trading and institutional portfolio management advisory.

Born in Mexico, Kostohryz grew up between south Texas and Colombia, has lived and worked in nine different countries, and has traveled extensively in more than 50 others. Kostohryz actively pursues various intellectual interests and is currently writing a book on the impact of culture on economic development. He is a former NCAA and world-class decathlete and has stayed active in a variety of sports.

Kostohryz graduated with honors from both Stanford University and Harvard Law School.

View Kostohryz's LinkedIn profile and connect with him here; follow him on Twitter here and Google+ here. When connecting, be sure to identify yourself as a reader from TheStreet.

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