Apple stock is on track to produce its sixth straight month of positive returns, dividends included. For it to happen, shares need to close August above $425 – or $106.25, post stock split. Here are a couple of interesting facts:
- Six consecutive positive months have happened eight times in total since Apple’s 1980 IPO.
- These runs tend to happen around market corrections: either right before, as the stock overheats in bubble-like fashion, or right after, as shares recover from the trough. Examples include the dot-com rally of early 2000 and the Great Recession recovery of 2009.
- The last time that Apple witnessed a six-month uninterrupted climb was in 2014, not long after a painful 45% correction that took place between late 2012 and early 2013.
Do shares correct after a rally?
Apple investors may be asking whether the stock has gone too far. It is tempting to lock in the 125% gain of the past 12 months, and cash in the chips while shares are still ahead.
I have stated in the past that trimming the Apple position to better balance a portfolio is not necessarily a bad idea. However, history suggests that, when it comes to Apple stock, not everything that goes up must come crashing down.
The graph below shows the average three-month (i.e. forward-looking) return after Apple rallied for five months or more. Notice that, on average, shares tend to produce positive gains following the spikes.
The most notable exception was October 2007. After rallying for eight months straight on the back of the original iPhone launch, Apple did not resist the pressures of the Great Recession. Between November of that year and January 2008, Apple was down 29%.
When it comes to the three-month performance following a six-month winning streak, something interesting has happened historically. Only once out of eight times did the share price move up or down by less than 10%. In all other cases, Apple either corrected or rallied by more than 10% in the next three months. See chart below.
Conclusions about Apple’s rally
As the stock approaches half a year of uninterrupted wins, is this the right time to let go of Apple? From a portfolio strategy and risk management perspectives, maybe – at least partially. From an assessment of historical trends, not necessarily.
Generally, I remain an Apple bull at current levels. The business fundamentals seem solid enough to justify a buy-and-hold strategy with an eye on the long-term future.
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(Disclaimers: the author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting The Apple Maven)