While I continue to believe that Apple (AAPL) is overpriced, the tech giant's latest quarterly results came in better than I and others expected. So, I took a loss and covered my short of the stock on Tuesday evening after-hours and into Wednesday.
I still believe that Apple's core smart-phone business is not only mature, but also vulnerable to competitive influences and has product-cycle risk. But the company's results benefited from a higher growth rate in services, which is a recurring source of revenue that Apple can grow over time.
An expanding services business improves business quality and will be greeted optimistically by the market's Apple bulls. As a result, the market appears willing to reset Apple's valuation higher -- to a level I don't feel is justified, but markets will do what markets will do.
Apple's plan to return more capital to stockholders should also satisfy most investors. Share repurchases are an attractive financial proposition to Wall Street. After all, the imputed cost to finance them is far below the pretax cash cost of the dividend. And lastly, the promise of more company jobs and capital spending should satisfy the folks in the 202 area code.
AAPL's latest quarter also saw good progress in China. The acceptance of Apple Pay on large Chinese cities' transit systems signals that politics are in order there for the firm.
Of course, Apple's latest results weren't without blemishes. For example, pretax income only rose 10%, inventories soared more than 164% and quarterly iPhone sales remained at the lower range of what we've seen over the past four years. Still, Apple rose some 4.4% to close at $176.57 Wednesday, but I covered my short at a loss before the market opened.
Fortunately, I made a considerable profit shorting Apple over the past month, as I shorted and covered the stock in April when it dropped from nearly $180 to $160. But this week, I was short and covered my position after the shares rose by about $10.
As the old saying goes: "Sometimes you eat the bear, and sometimes the bear eats you."
(A longer version of this column originally appeared at 7:43 a.m. ET on Real Money Pro, our premium site for active traders and Wall Street professionals. Click here to get great columns like this from Doug Kass, Jim Cramer and other experts even earlier in the trading day. This column has been updated to reflect Apple's Wednesday close.)