By Timothy Lutts, Chief Investment Strategist and Editor of Cabot Stock of the Month
From Cabot Wealth Advisory 4/11/11 Sign up for free Cabot Wealth Advisory e-newsletter
Last week brought the news that when the market closes on April 29, Apple’s (AAPL) weighting in the Nasdaq 100 will be cut from 20.5% to 12.3%.
The reason? The stock has been too successful, and the “extra boost” that it was given as a small stock when the index was last adjusted in 1998 now makes the stock’s impact on the index excessive.
Other successful growth stocks will see their weightings reduced as well.
At the same time, the weightings of the titans of a decade ago, Microsoft (MSFT), Oracle (ORCL) and Intel (INTC) will be increased, in part because these stocks haven’t kept pace with AAPL.
The short-term implication is that institutions and indexes that seek to simply replicate the performance of the index will need to sell some of their APPL and buy more MSFT, ORCL and INTC.
But what does it mean in the long-term?
Consider this.
The only other special rebalancing of the Nasdaq 100 came in 1998, just before the top of the tech bubble. In that rebalancing, Microsoft, which had briefly topped a 25% weighting, was the target of the biggest cut.
And what’s happened since?
MSFT stock is lower today than it was back then, even though Microsoft’s revenues and earnings have both grown more than four-fold.
Now, I’m not predicting that AAPL will suffer the same fate. History may rhyme, but it doesn’t necessarily repeat.
Nevertheless, it’s important to be aware of all the factors that influence stocks’ moves, and in the case of leading stocks in particular, you’d be remiss not to consider the role of public sentiment.
In this case, Apple is a very highly regarded company, whose products are increasingly loved by people all over the world. And that’s great for business, but it also means that you should be aware that Apple may be close to the point of peak perception, just as Microsoft was 13 years ago.
For the record, I’ve been an Apple user since 1987. I’ve bought more Apple computers than I can count, for both business and home use, and today I’m a regular user of MacBook Pro laptop, an iPad and an iPhone. They’re all fabulous products, and I think the company has a great future.
But I know better than to confuse the company with the stock. They’re two different animals, as Microsoft has demonstrated so clearly over the past 13 years.
Editor's Note: Subscribers to Cabot Top Ten Weekly recently nabbed 36% profits in AAPL! To learn more about other leading stocks recommended by growth stock expert Michael Cintolo, click here. Ten new trades are available online now and every Monday. Don’t miss them!
Timothy Lutts
President, Chief Investment Strategist, Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.
By Elyse Andrews, Editor of Cabot Wealth Advisory
From Cabot Wealth Advisory 10/23/10 Sign up for free Cabot Wealth Advisory e-newsletter
Apple (AAPL) sold 4.2 million of its iPad tablets in the most recent quarter. While the iPad isn’t strictly an e-reader, it does compete with Amazon's Kindle, and is especially popular with customers seeking more functionality from the device. Here’s what Mike had to say about the stock in late September:
“Apple needs no introduction, as it's one of the best-known (and best-loved) companies today. The big news during the past few months was probably news that did not come about—after a well-publicized mess-up with its new iPhone (antennaegate), consumers didn't storm out and the issue seems to be resolved. And that allows investors to look ahead to the many other irons Apple has in the fire, such as the fast-selling iPad (some now see north of 20 million sold during the next 12 months), a possible new iPhone using Verizon's network (this could be particularly huge for business), new Mac computers, and the new Apple TV, which allows Netflix streaming and movie rentals right to a TV. Sales and earnings growth remains terrific, and valuation, at 22 times trailing earnings, is surprisingly reasonable.”
AAPL hit new highs recently and while it stumbled a bit after its earnings report on Monday, the stock recovered as the week went on. And the company is clearly going strong and has a lot of potential for the future. Just this week, Apple held an event focusing on its Macintosh computer where it announced a new operating system, called Lion, and a new version of its ultra-thin Macbook Air.
Surely, if the trend toward reading on devices, rather than from books, continues, AAPL stands to benefit. You could buy the stock here and hope for the best or you could get more expert buy, sell and hold advice from Mike in Cabot Top Ten Weekly. Click here to learn more about Apple and other leading stocks.
Elyse Andrews
Editor of Cabot Wealth Advisory
Elyse Andrews edits Cabot Wealth Advisory, a free email newsletter that offers independent, no-nonsense investment advice on how to build long-lasting wealth written by Cabot's analysts and editors. Every Saturday, Elyse writes the Weekend Digest, which includes her column and a summary of Cabot Wealth Advisories that readers may have missed during the week. Elyse is also a regular contributor to The Iconoclast Investor, a blog for Cabot editors and readers to share their views and interact with each other.
Apple (AAPL) at All-Time High Price
By Timothy Lutts, Chief Investment Strategist, Editor
Cabot Stock of the MonthOriginally published in Cabot Wealth Advisory 12/28/09
Apple (AAPL) broke out of a basing pattern today, gapping up to new all-time highs.
Now, Apple is far from an undiscovered stock. With revenues of $37 billion and a market capitalization of $192 billion, it's a giant, and my preference is for smaller companies with more obvious upside potential in investor perception.
Nevertheless, Apple's chart is sending a strong signal.
For the past 10 weeks it's been building a base at the 200 level, which is where the stock topped out at the end of 2007. And today it gapped up to all-time highs, telling us big institutional money is moving in.
The only "news" lately is speculation that Apple's long-rumored tablet computer will be released on January 26, in both 7" and 10" screen formats, and that it will be a big hit. It certainly sounds plausible, and combined with the fact that Apple still has great numbers (revenues up 25% in the third quarter and earnings up 44%), I think it's reason enough to buy the stock.
Timothy Lutts
President, Chief Investment Strategist and Editor of Cabot Stock of the Month
Timothy Lutts heads one of America’s most respected independent investment advisory services, publishing eight newsletters to more than 165,000 subscribers around the world. Tim leads a dedicated team of professionals who serve individual investors with high-quality investment advice based on time-tested Cabot systems. Under his leadership, Cabot has been honored numerous times by both Timer Digest and the Hulbert Financial Digest as among the top investment newsletters in the industry. Tim also edits Cabot Stock of the Month.
The Best Stock Across All Sectors
If you want to diversify your portfolio and profit from using several different investing philosophies to pick winning stocks, Cabot Stock of the Month is right for you. Not only is it priced so low that every investor can afford it, it's also designed so that subscribers get a taste of a multitude of investing styles.
The price of Cabot Stock of the Month is so low, you'll recover it from your very first profitable investment. Learn more about Cabot Stock of the Month today!
By Paul Goodwin, Editor of
Cabot China & Emerging Markets ReportOriginally published in Cabot Wealth Advisory 5/4/09
One of our rules for evaluating growth stocks is that the leaders of a previous bull market are seldom the leaders of the next one. In fact, the odds are about four-to-one against it.
But Apple (AAPL) is apparently beating those odds. The stock, which peaked at 203 during the last days of 2007 and completed a kind of double top at 192 about a year ago (with a dip to 115 in between), is now coming off a new base after bottoming at 78 in January.
It's not just the run from 78 to 138 that makes AAPL attractive. And it's not just the boost the stock will get when (and if) Steve Jobs reports for duty again.
No, it's the flood of sales for the iPhone and all the apps for the iPhone flowing together with the billions of songs purchased from iTunes and the still substantial sales of iMacs and PowerBooks to make a river of revenue. So far, analysts haven't been able to get their minds around the money you can make by offering consumers "insanely great" products. And we're not even talking about the possibility of getting the iPhone into the hands of Chinese consumers.
Apple's revenues during the fourth quarter of 2008—the lowest point of a very low period for the market—were still up 6%, which improved to 9% in Q1. Earnings were up 1% in Q4 and have improved to a respectable 15% in Q1. AAPL isn't cheap (P/E ratio of 23) and isn't unknown (857 institutional supporters). But it's pretty much broken every rule in the book, and if it wants to be a leader in this new bull market, I'm not going to say no to it.
Paul GoodwinEmerging Markets Specialist, Analyst and Editor of Cabot China & Emerging Markets ReportA researcher and writer for over 30 years, Paul Goodwin has been a member of the Cabot investment team and editor of Cabot China & Emerging Markets Report since 2005. Under Paul’s stewardship, Hulbert Financial Digest rated Cabot China & Emerging Markets Report the number-one-rated newsletter of 2006 with a 78.6% gain for the year, the number-one-rated newsletter of 2007 with a 74.1% return. Cabot China & Emerging Markets was also named 2007 Investment Letter of the Year by Peter Brimelow of MarketWatch.
The #1 Financial Newsletter for Five Years
One investment advisory is beating the market with incredible returns over the last five years. Hulbert Financial Digest ranks it #1 for performance during that time--up a huge 128% versus the market’s gain of 2%. And there’s more where that came from!
Don’t miss out on the next five years of monster growth! Learn more about Cabot China & Emerging Markets Report today.