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Apple Stock: A Tough First Half Of 2021 In Review

First half of 2021 was neither disastrous nor overly bullish for Apple stock. Today, the Apple Maven tells the story of AAPL’s performance between January and June.

The first half of 2021 is over. Investors who saw Apple stock  (AAPL) - Get Apple Inc. (AAPL) Report skyrocket in the past two years must have felt a bit more uncomfortable this time. Shares of the Cupertino company managed to climb 3.5% from January to June 2021, but with quite a bit of volatility and pullbacks along the way.

Today, the Apple Maven reviews AAPL’s journey through the first half of the year.

Figure 1: Apple store in Singapore.

Figure 1: Apple store in Singapore.

(Read more from the Apple Maven: When AAPL Traded Like A Meme Stock)

Apple’s performance in the first half

We start with a high level overview of Apple stock’s performance in the first half, along with some interesting metrics. See bullet points below:

  • Absolute annualized return of 7% (see chart below), which compares unfavorably to the S&P 500’s annualized 33%, and Apple’s own 23% since the 1980s.
  • Annualized volatility of 34%, high (i.e. not good) compared to Apple’s 27% over the past decade, which even included the jittery pandemic year of 2020.
  • Maximum drawdown of 19%, as Apple barely escaped bear territory in March 2021.
  • Best month of returns: June, 10%
  • Worst month of returns: February, -8%
Figure 2: Annualized return - AAPL vs. S&P 500.

Figure 2: Annualized return - AAPL vs. S&P 500.

The year started with bullish expectations for fiscal first quarter results. Ahead of the Janury 27 earnings day, Apple stock price climbed a whopping 12% in only one week to reach all time highs. Investors were likely excited about pent up demand for the iPhone 12, whose release in 2020 had been delayed.

But that was as far as AAPL went all year. By March 8, less than six weeks after earnings, the stock was tiptoeing around bear-style correction territory – a pullback of at least 20% from the top.

Nothing seemed particularly wrong with Apple itself, other than some speculation on Wall Street that demand for Apple’s products and services could falter with the end of the stay-at-home consumer trends. However, bearishness in Q1 can probably be best explained by the following:

  • The cyclical rotation, which started roughly with the announcement of the first COVID-19 vaccines in November, picked up steam in February. It was time for investors and traders to bet on banks, airlines and commodities, not on Big Tech.
  • Inflation concerns took center stage, as the global economies began to reopen. As a result, the 10-year treasury yield skyrocketed from 1.0% to 1.6% during the same period that Apple shares headed sharply lower. Higher interest rates are bad news for growth and tech stocks.

Probably not a coincidence, Apple share price climbed from the gutter (a 2021 low of $116, in this case) as soon as yields stabilized, starting around mid-March. By mid-April, Apple started to show signs that it could reach all-time highs any moment.

It is possible that the company’s “Spring Loaded” event, on April 20, also contributed to briefly improved investor sentiment. But shortly after the unveiling of the iPad Pro, new iMac with M1, Apple TV 4K, AirTag and purple iPhone 12, Apple shares head down 9% from the April high through May 12.

Only at that point did Apple find its way north again. June, for instance, was a fantastic month of returns for the stock. I believe that bullishness can be credited to the usual summer anticipation of the new iPhone model and holiday season sales.

This, coupled with (1) forward P/E multiples that dipped to the low 20s, (2) stable yields and (3) a dip in market volatility, led me to becoming much more bullish on Apple for the next few months.

(Read more from the Apple Maven: Apple Stock: Countdown To Earnings Day Begins)

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Apple stock lagged the S&P 500 by quite a bit in the first half of 2021. But shares remain way ahead of the benchmark over the past couple of years. After all, is AAPL cheap on recent underperformance, or expensive on 2019-2021 outperformance?

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(Disclaimers: this is not investment advice. 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)