Apple Stock’s Best Day of 2021: Too Late To Buy?

Apple stock sprung forward on the first day of March. What does this mean for the buy-on-dip opportunity that existed until recently? The Apple Maven discusses what to do next.
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Apple stock has shot through the roof on the first day of March 2021.

Shares ended the Monday trading session up 5.4%, ahead of the S&P 500’s 2.4% gain. This was Apple’s best day of performance since October of last year. A couple of factors driving the rally include:

  • the reopening of all Apple Stores in the US
  • Warren Buffett’s praise of Apple in his annual letter to shareholders (more to come on this subject from the Apple Maven soon)
  • the broad-based recovery in tech, up 3.3% for the day

Now, shares of the Cupertino company are only 10.6% below the all-time highs, nearly out of correction territory – which is usually defined as a peak-to-trough decline of 10%. Who would have thought that such recovery would take place only a week after the stock “flirted with the bear”?

With the most recent spike in share price, is now too late for investors to buy Apple on the dip?

Lesson learned and what to do next

I have been speaking of the somewhat rare chance to buy Apple on weakness for a few days.

On Seeking Alpha, I called this “the first buying opportunity in months”. I also pointed out that Apple’s valuation had been bouncing off a floor, suggesting demand for shares are a price-earning ratio of about 33 times. Most recently, I indicated that the late Friday sudden selloff might have given investors one more opportunity to buy Apple on the cheaper:

This Monday’s 5%-plus jump teaches one lesson: stock prices can move very quickly, and windows of opportunity can close with the blink of an eye. This is particularly true when a stock is trading off its peak.

But rather than mulling over missed chances, let’s look forward.

The first point to be made is that Apple is still undergoing a period of high volatility, as the chart below illustrates. The rolling thirty-day annualized volatility of nearly 33% is still a good bit above the stock’s historical five-year average of about 26%.

It is unlikely that Apple shares will just climb undisturbedly from here. During periods of high volatility, further share price dips are to be expected. Who knows, maybe the window of opportunity to buy Apple at $120 apiece or thereabouts will open up again.

Apple's rolling 30-day annualized volatility.

Apple's rolling 30-day annualized volatility.

Source: DM Martins Research, data from Yahoo Finance

But also, don’t forget that Apple is still a solid 10% below all-time highs. I explained in a previous article that the most successful trading strategy, since Apple went public in 1980, has been to buy shares as far off the peaks as possible, and then waiting patiently for the rebound.

Historically, the average forward one-year return of buying Apple 10% below all-time highs has been a very respectable 38% (dark blue bar below). This represents a four-percentage point advantage over simply buying the stock at any price.

Sure, picking up shares after 15% or 30% declines would have been better. But in the absence of perfect, good enough might do the trick.

Average one-year return on AAPL, by strategy.

Average one-year return on AAPL, by strategy.

Twitter speaks

I think that Apple is still priced attractively at current levels, even if some of the potentially outsized gains of investing in the stock have already been captured. Does Twitter agree with me?

Read more from the Apple Maven:

(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)