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Sold Out of Apple; Return of the Anti-Cramer: Best of Kass

NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.

Among the posts this past week were items about Apple and risks ahead.

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Sold Out of Apple

Must Read: Bulls Have a Tall Order; IPO Drag Is Almost Over: Jim Cramer's Best Blogs

Originally published on Friday, April 11, at 10:32 a.m. EDT.

Going into today, I was down to tag ends on Apple (AAPL), and I just sold the balance of my stock this morning.

While I don't think there is much downside, I don't think there is much upside either.

The more I think about the stock, the more I suspect the shares will be range-bound ($475-$550), with no clear visible catalyst over the next few quarters. In other words, reward vs. risk is unfavorable, as there may be slightly more downside to upside to the share price.

Significantly, I don't expect a meaningful change in capital allocation policy either in the form of an increased dividend or in a meaningfully expanded share repurchase program.

Carl Icahn and others have pleaded for more aggressive capital redeployment, but that vision might be muted by a generally lackluster profit outlook. Neither the core computer nor the company's smartphone business segments have done anything new in terms of innovation over many quarters.

Moreover, when the market bottoms, I suspect there will be many more attractive investments.

The headwinds to profits and valuation remain clear:

  • High-end smartphone penetration is realtively mature.
  • Law of large numbers -- it's hard to move the needle even with highly successful new product offerings.
  • The once-in-a-century innovator, Steve Jobs, cannot be replaced. I know Tim Cook; Tim Cook is no Steve Jobs.
  • Apple's products are expensive -- in a subpar global economy and given the failure of real disposable incomes in the U.S., price and demand elasticity will likely take hold and will reduce Apple's product reception.
  • The competitive landscape has changed adversely over the last two years. It won't get better. There are more competitors with equally attractive mousetraps to Apple than ever before.

Many of the factors that I wrote about in my bear case for Apple back in September 2012 (when shares were trading around $700) still hold true.

I am removing Apple from my Best Ideas list.

At the time of original publication, Kass had no position in the stock mentioned.

 


The Return of the Anti-Cramer!

Originally published on Thursday, April 10, at 8:48 a.m. EDT.

Run, don't walk, to read Jim "El Capitan" Cramer's excellent opening missive, "Conquering Our Fear of the Past."

In his commentary, Jim makes the case that Jamie Dimon's letter to JPMorgan Chase(JPM) shareholders should make investors consider taking on more risk, as the risks are in the rearview mirror.

Maybe so, but I see plenty of risks ahead and even a few bubbles.

As I recently wrote in "From the Generational Bottom to the Cyclical Top?":

In the main. I see three bubbles that exist today:

1. The IPO market;

2. The social media sector; and

3. The belief that the Fed's quantitative-easing policy is sufficient by itself to generate a self-sustaining domestic economic recovery.

And let's add one more bubble:

4. There is a bubble in credit.

As evidence:

  • First Puerto Rico bonds now Greek bonds;
  • Spanish and Italian yields converging with U.S. yields;
  • Investment grade spreads at +100; and
  • High-yield spreads at +340 are within 100 of May 2007, but, more importantly, yields are 200 basis points lower than May 2007 because of where Treasuries are trading.

This is what happens when our central bank is run by a bunch of academics who have no clue about anything. I don't know if the next blow-up will be worse than 2008 because our banks are better capitalized and more liquid, but I do know that a lot of people are going to get their clocks cleaned.

Finally, I would also argue (in reaction to Jimmy's article) that after a near-doubling in the S&P 500, risk aversion may not be such a terrible thing now.

After all, as Warren Buffett wrote, "Price is what you pay, value is what you get."

At the time of original publication, Kass had no position in the stock mentioned.

 

Doug Kass is the president of Seabreeze Partners Management Inc. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.

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