Buy Apple Stock Before The Start Of July

The Apple Maven is optimistic about Apple stock in July. Here are the key reasons why.
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The Apple Maven brings to readers of The Street all things Apple stock  (AAPL) - Get Apple Inc. (AAPL) Report, and the channel tries to keep a balanced view on shares of the Cupertino company. For instance, in late August 2020, I saw enough reasons for investors to trim their Apple positions after an overdone rally.

This time, the Apple Maven is much more optimistic about AAPL. I believe that Apple is a great stock to own for the long term – but that even short-term performance through the next five weeks could be market beating by a decent margin.

Figure 1: Apple's product ecosystem.

Figure 1: Apple's product ecosystem.

Read more from the Apple Maven: Apple Stock: Why Waiting To Buy Is A Bad Move

Calendar trends

The first reason to feel good about AAPL may sound silly at first: Apple stock tends to perform best in July and August. The outperformance of shares over the S&P 500 in the past decade has been a solid 5%, on average. In the past five years, AAPL has trailed the market only once in July, and by less than -1%.

There is likely a good reason for AAPL’s outperformance in the first half of the Summer. Investor sentiment likely begins to improve a few months ahead of two key calendar events: the launch of the iPhone in September and the holiday shopping season. See chart below.

By the end of the third calendar quarter, when financial results are likely to reflect strong demand for Apple’s products and services, gains have already been made in the market. Investors begin to sell the news, causing stock returns to lag, or barely match, the S&P 500 between September and December.

Figure 2: Average monthly returns vs. S&P 500 (seasonality).

Figure 2: Average monthly returns vs. S&P 500 (seasonality).

Read more from the Apple Maven: This Bull Sees Apple Stock Rising 40%

A tame market

Another reason to be optimistic about Apple stock has to do with the markets in general. The S&P 500 has finally calmed down, despite a moment of panic driven by the Fed’s announcement to start “talking about talking about” monetary tightening. See chart below and notice the 52-week low in volatility.

Figure 2: S&P 500: rolling one-month annualized volatility.

Figure 2: S&P 500: rolling one-month annualized volatility.

Read more from the Apple Maven: 1980 To Now: The Journey Of Apple's Market Cap

Although intense market action can be good news for traders in search for disruptions that could unveil a buy or sell opportunity, long-term investors should welcome a less jittery market environment. As I explained a few weeks ago:

“The value of risk assets tends to rise over time. Therefore, there is no better time to invest than when stocks offer us not much more than beta (i.e. a few basis points of return per day) without the heartache of an edgy market.”

This, in my view, is another reason why Apple stock should rise in July and get even closer to its all-time highs, absent bearish developments that are hard to foresee at this moment. In other words: lack of bad news is good news, even more so for high quality stocks like AAPL.

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The Apple Maven is optimistic about AAPL in July. How about you: what do you think will happen to Apple stock next month?

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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)