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Doug Kass's Trading Sardine: Apple

Stocks in this article: AAPL

Continuing the trend of highlighting some of Doug Kass's trades ahead of his showdown with famed investor Warren Buffett in Omaha on Saturday, I am following up with one of his favorite stocks to trade. The one, the only, Apple (AAPL).

This week, the company made headlines by issuing a record $17 billion of bonds, with much fanfare. The debt issuance was in response to the company's commitment to returning $100 billion in capital to shareholders.

Last week, Apple reported second-quarter earnings that beat analysts' expectations. At the same time, the company announced plans to buy back an additional $50 billion in stock while raising its dividend by 15% for an annual yield of about 3%.

Doug has traded the stock extensively over the past year, starting around the time when many began to question its sustainability as a growth stock. The capital deployment plans mentioned above certainly help to move the stock further into the value category.

We'll go in chronological order, but it's important to note that Doug has traded Apple both long and short and the trades mentioned below only highlight some of the trades he made. The first trades we'll cover were on Nov. 27 (daytrade) and Nov. 29 (covered on Nov. 30), 2012. Both were short trades, with the stock trading around $591 on the initiation dates. By this time, the stock had already come well off its September 2012 high of $705, but had rebounded from a low of $525 in mid-November and Doug wasn't convinced that the downside was complete. He covered both these shorts after they had declined around $7.

Switching gears, Doug suggested taking the long side of Apple in late-February 2013. This was just ahead of the company's shareholder meeting (set for Feb. 26) but after hedge fund manager and Apple investor David Einhorn had sent a letter to shareholders asking that they vote against Apple's proposal to do away with preferred stock so that the Board can unlock the cash position. By the end of the month a handful of analysts started talking about the potential for a cash distribution to be announced at the shareholder meeting.

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