I didn’t understand the doom-and-gloom last January. As growth funds started selling their positions in Apple (AAPL) when it became evident that the iPhone had suffered its first ever decline, writers were freaking out as if Apple stock was on a long ride to zero. They totally ignored the fact that Apple had a steady business, high margins, and a good management team. Their pessimism didn’t make any sense.
That pessimism is what prompted me to write about the transition that was going on with who owned Apple stock. In short, value-fund managers were replacing the growth investors. Warren Buffet is exactly who I had in mind when I wrote that piece. He’s the prototypical value guy who looks for steady demand and a wise management team. I was not too surprised this week to see that Berkshire-Hathaway more than doubled its shares of Apple to $17 billion.
It was logical and to be expected that there would be a temporary pullback as the stock transitioned to a new crowd. When you do your Christmas shopping, you don’t buy as easily early in the season because you know that there will probably be lower prices closer to Christmas. It was the same principle with the value fund managers, who didn’t want to jump on Apple stock until it was cheaper.
I predicted that once Apple stopped dropping and the value funds started jumping in that you’d see a slow but steady climb. That’s exactly what happened. I even predicted that Apple would bottom out at $90. That part was luck.
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It was logical and to be expected that there would be a temporary pullback as the stock transitioned to a new crowd. When you do your Christmas shopping, you don’t buy as easily early in the season because you know that there will probably be lower prices closer to Christmas. It was the same principle with the value fund managers, who didn’t want to jump on Apple stock until it was cheaper.
I predicted that once Apple stopped dropping and the value funds started jumping in that you’d see a slow but steady climb. That’s exactly what happened. I even predicted that Apple would bottom out at $90. That part was luck.
Related
------------
Does the Price of AAPL Matter to Apple?
AAPL’s Time in Purgatory
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