WASHINGTON, January 23, 2013 – Onetime market matinee idol Apple (AAPL) is getting mercilessly battered this morning for the sin of reporting essentially in-line earnings in its latest quarter. Already down nearly 30% from its plus $700 high last fall, the stock is closing in on negative 40% now, down a whopping 50+ points as we write this around 10:30 a.m. EST. Having already hit an intraday low of $450.66 per share, AAPL is now struggling to stay above the $460 mark in active trading.
Predictably, the pro and con analyst bloviating is now at a fever pitch online and on the telly, with the negative remarks getting the most media play, as usual in this biz.
Meanwhile, the action in AAPL has killed the tech-heavy NASDAQ index this morning. It’s down over 30 points. The broad-based S&P 500, also loaded with tech, is anemic, currently sitting just slightly below flatline.
The Dow Jones Industrials (DJI), though, are rallying again, for what, the sixth or seventh business day in a row? We love it because we’re long, but this kind of run also makes us nervous. Nothing ever goes straight up or straight down. We continue to sell profitable positions piecemeal today plus one bank—First Niagara (FNFG)—that didn’t quite work out as we’d planned after reporting wishy-washy numbers.
After ticking up this morning, our REITs continue to get hit a bit, indicating that at least a certain body of traders is looking for a little more beta in their investments.
For the uninitiated, “beta” is simply a measure of the price volatility of a given investment. A beta of 1.0 is considered average or normal; less than 1.0, say 0.85 is lower than normal; 1.25 is higher than normal; and 2.5 is way higher than normal. The higher the beta, the faster a stock moves up or down within market context. A lower beta stock, however—typically a utility stock these days—moves up and down more slowly than the market as a whole.
REITs, like utilities, tend to have a low beta, making them more stable in an uncertain market, protected as they are—like utilities—by high dividends. High beta stocks, like AAPL, pay lower dividends or no dividends at all and are prized for the violence of their movement up or down, which often makes them better as short term rather than long term plays since you have to trade them more frequently to protect yourself from the occasional violent downdraft. Like the one AAPL is experiencing today.
In any event, we’ll stick with our REITs for now since we think this market is headed for a correction soon as Congress begins to slug it out over the budget out at the OK Corral, otherwise known as Capitol Hill. The large dividends we’re currently collecting in this sector will make the occasional hits upside the heads of these stocks a lot easier to take, at least in the short run. Ditto the oil and gas MLPs (Master Limited Partnerships) we’re currently holding.
As far as everything else is concerned, the market really feels toppy, and Friday might be a good day for at least a brief correction to begin.
UPDATE: The imminent correction may already be rearing its ugly collective head. We’ve been held up on finishing this column today, and at approximately 2:15 p.m., the Dow, while still up, is looking wobbly, and the NASDAQ is really in disaster territory today due to a poisoned AAPL. Have a good one, and continue to lighten up. When the correction hits, it likely won’t be very pretty.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Any positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any ar500ticle under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.
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