WASHINGTON, October 19, 2017 – Some sort of market correction finally began to happen Thursday morning. The Dow plummeted sharply after the 9:30 a.m. (ET) opening bell on Wall Street, quickly dropping 100 + points in a wave of selling. Apple (symbol: AAPL) shares – currently down around $4.50 per share (-2.5 percent) – have led the drop in the Dow and in the tech-heavy NASDAQ as well.
Apple and the NASDAQ were heavily influenced this morning by still more of the continually negative gossip that’s been hitting shares since the company’s mid-September product introduction extravaganza. As always, the current rumor-drip concerns anecdotally tepid iPhone 8 sales. The panic selling doesn’t account for several obvious facts.
First and foremost, Apple naysayers consistently ignore the fact that many potential iPhone purchasers are still waiting for those snazzy new iPhone X models, which are not scheduled to be available until the first week of November. Ignored is news that sales of Apple’s previous iPhone model, the iPhone 7, are brisk. True, lower margins, but sales are sales and profits are profits.
Further, CNBC reported on a surprising development in the ruthlessly ignored Apple Watch story that’s been unfolding beneath the radar for most analysts and investors:
“The Apple Watch Series 3 is gaining ‘significant momentum,’ according to Daniel Ives, head of technology research at GBH Insights, previously a well-known analyst at FBR Capital Markets.
“Ives checked at Apple Stores and took surveys, and found that 70 percent of Apple Watch Series 3 buyers did not own the Series 1 or Series 2 product.
“‘This data point speaks to our belief that the Apple Watch Series 3 could be a “game changer” release for Cupertino to open up this wearables category for the coming years,’ Ives wrote in a Wednesday research note.”
Since Apple has not been breaking out Apple Watch figures in its quarterly reports, increased sales of this innovative but slowly evolving device, added to whatever iPhone X sales manage to book in Q4 2017 (which is actually Apple’s fiscal first quarter) could very well make holiday mincemeat out of analysts’ current dire predictions for Apple’s upcoming sales and earnings numbers. We’ll just have to wait and see. But currently, we’re a lot more worried about our portfolio’s ongoing Allergan preferred stock (AGN/PRA) disaster than we are about Apple stock.
AAPL can and does move pretty violently up and down, but holding onto it through thick and thin has generally been a good bet since the now-late Steve Jobs started getting his old company out of the rut in the late 1990s.
We’ve actually picked up a few more shares on today’s allegedly terrible news. At $155-156 per share, Apple shares are still pretty expensive. But over the years, the best bet (usually) is to pick up AAPL shares when they get hit rather than chase them when they’ve begun to soar.
On the other hand, despite this week’s four record-breaking bullish days in a row, heavy selling has hit many stocks near each day’s 4 p.m. close, indicating equally heavy and nervous profit-taking, with perhaps some additional short selling unfolding as well.
So, as we indicated in our companion column today, we’ve started to sell off a few profitable positions that have been getting hit consistently with this closing-bell selling.
Gone today is our holding in Lowe’s (LOW) for about a 4 percent profit. Container shipping company Triton (TRTN) is gone as well for a 14 percent profit. We sold competing container company Textainer Group Limited on Wednesday for a 7 percent profit.
Also gone but not forgotten: Our small position in defense/manufacturing company United Technologies (UTX) for a 7 percent profit, and (regrettably) our nicely profitable (+15 percent) position in Marathon Oil (MRO), which seems to be topping out near-term.
Against these profits, we’ve started liquidating our miserable position in biotech firm Portula Pharmaceuticals (PTLA). This was one of two biotech secondary issues we picked up, as opposed to hotter issues our brokerage gave out only to richer clients. We got stuck with the dross.
Our entire PTLA position is currently down nearly 10 percent from our purchase price, so we started to unload the stock in increments beginning today. It’s exceeded our loss limit, so these shares have to go, even though they do have a very promising biotech product release pending in 2018. If we get a market correction in earnest, these shares will lose a lot more value. So it’s better to take our lumps now.
Until we see this regular and rather substantial late-day selling epidemic subside, we are going to take profits in additional positions first and foremost to protect those profits. But second, selling nicely profitable positions raises cash, which gets us ready to buy new bargain stocks once this current, sneaky, late-day selling binge comes to a close.
Back tomorrow if markets warrant. In the meantime, although we’re in “favorable seasonality” for investing through the end of the year, we all still need to be Aware of the Bear.