Everyone knows the market is overbought up here. But let me throw some coal on the fire by giving you some perspective via Apple.
Year-to-date Apple (NASDAQ:AAPL) is up 67%. That’s well ahead of the S&P 500 up around 26%.
Except here’s the crazy part….
Since last year Apple has grown revenues and earnings by 1%. All the price appreciation that’s happened this year has been off the back of multiple expansion.
Investors act like Apple is entirely immune to the trade war going on. And they may be to some degree. Even yesterday the president stood outside an Apple factor in Texas and reiterated a talking point from Tim Cook; you can’t tariff us and not a competitor like Samsung.
However, the market took a dive today on dimming hopes that the ‘Phase 1’ trade deal would be occuring. And yet Apple only declined in concert with the market.
I traded back during the dot com boom. So I know firsthand that multiple expansion can go from excessive to outright stupid. But, I fail to really understand the story with why Apple would be the beneficiary. They aren’t a high growth company anymore.
Consider the following; China makes up around 20% of Apple’s revenues. Globally around 5 billion of the 7 billion people own smartphones. The market is becoming saturated like PCs were at one point. Over half of Apple’s revenues comes from iPhone sales.
This is setting the stock up to really tank whenever the catalyst hits. I suspect it might actually be whenever they resolve (or don’t) the tariffs on December 15th. And this isn’t something I would get in front of. But this stock will make one heck of a short, and a leading indicator for the market when it does turn.
