Bullish Cross is a financial publication focused on disseminating cutting edge research and investment strategies on the financial markets. The publication has been around since early 2008, and has produced some of the very best investment research and financial predictions made in the public realm.
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We are known for making consistent top and bottom calls in the equity markets as well as for our unparalled Apple investment research. Our earnings estimates, flawless price targets, and uncanny short and intermediate-term directional forecasts for the company are unmatched by anyone on Wall Street.
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Apple Fiscal Q1: The Biggest Earnings Blowout in History
Friday, December 16, 2011
By Andy M. Zaky
Just as the bearish sentiment in Apple hits a cyclical peak, the company is about to deliver the the biggest earnings blowout in the history of the world. We’re talking about the mother of all earnings blowouts. Well maybe not that big, but certainly the largest blowout in company history without question.
The difference between wealth and poverty on Wall Street is determined by ignoring the fluff, respecting the details and using reason to tease out the bottom-line reality generally overlooked by the masses. While everyone focuses on whether the passing of Steve Jobs marks the end of Apple, or whether the Amazon Kindle Fire will kill the iPad, the company is quietly selling millions upon millions of iPhones that far exceed even the most rosy expectations.
The largest company in America is about to grow its earnings by a whopping 84% this quarter, and Wall Street is asleep at the wheel. Apple’s trailing twelve months of earnings is going to skyrocket from $27.68 to at least $33.00 which will finally drive Apple’s P/E ratio down into the 11′s. While fund managers continue to debate whether they should buy Amazon (AMZN) at a 95 P/E ratio or Google at 22 P/E ratio, Apple will have reported more in revenue in one quarter than each of these companies reported all last year.
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Why Apple’s Guidance is Still Conservative
Tuesday, December 13, 2011
By Andy M. Zaky
There has been a tremendous amount of chatter recently that Apple may have scrapped its conservative guidance for a more “realistic” approach going into the future. Many believe that Apple’s fiscal Q1 2011 earnings will come either in-line or slight above the Wall Street consensus estimates based on this new shift in Apple’s guidance strategy. In a recent report, we published an exhaustive study on how to properly use Apple’s guidance to accurately forecast earnings. This article will focus on why Apple’s guidance strategy hasn’t change one bit despite the predominate opposite viewpoint on Wall Street.
The main reason that many on Wall Street believe Apple has changed its guidance practices to a more “realistic” approach for fiscal Q1 is due to the fact that Apple gave very strong revenue guidance that was a full $1.6 billion above the consensus.
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How to Properly use Apple’s Guidance
Monday, December 12, 2011
By Andy M. Zaky
It seems that almost daily now there’s yet another worthless article that incompetently tries to forecast Apple’s fiscal Q1 earnings by taking a look at Apple’s EPS guidance. The problem with that approach is that Apple’s EPS guidance is entirely useless. Understanding how to properly use Apple’s guidance to forecast earnings will get you to within 5% margin of error. Yet, to get there you have to use the right methodology. Trying to extrapolate anything from EPS guidance simply isn’t it.
The very first thing any good analyst should look for when forecasting Apple’s earnings is the company’s revenue guidance. Apple’s revenue guidance is not only the most important and consistent line item in the company’s overall multi-layered guidance, but it is by far the most important data point period. Those with a very strong background in finance can very accurately forecast Apple’s full income statement simply by understanding how to interpret the company’s revenue guidance. Yet, unlike Apple’s revenue guidance, its EPS guidance is by far the most random, meaningless and inconsistent number which acts as nothing more than a red herring for the inexperienced.
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Apple: The Most Undervalued Large-Cap Stock in America
Sunday, November 27, 2011
By Andy M. Zaky
In light of the recent sell-off in global equities, it is now an incontestable FACT that Apple is the most undervalued and underappreciated large-cap growth company in America. The stock trades at an extremely depressed valuation that Wall Street isn’t taking seriously (8.25 P/E Ratio), the company’s growth continues to outpace every large cap company on the entire S&P 500, and the company’s growth rate percentage – defying all laws of gravity – continues to accelerate without any sign of abating.
Every quarter that goes by, Apple reports another multi-year record high growth rate that continues to be brushed aside and overlooked by investors. Apple’s stock performance relative to its valuation and fundamentals, and relative to other companies with lower growth rates and more expensive valuations is completely abysmal.
In its recently reported fiscal Q3 2011, for example, Apple reported a 6-year record-high growth rate of 121.94%. Yet, one would never know this by listening to CNBC, Bloomberg or reading the average article from The Street.com or Business Insider. Instead, the only stories you will see are ones that don’t really matter in the grand scheme of things.
For example, instead of pointing out how the company reported 122% earnings growth in fiscal Q3 or the fact that the company trades at a 13 P/E ratio, CNBC is quick to point out how iPod sales – an operating segment that makes up only 4% of Apple’s total revenue – is slowing. Nevermind the fact that iPhone sales grew over 140% — four times the smartphone market — from 8 million units to 20 million units in fiscal Q3 or the fact that Apple’s revenue has almost tripled in 2-yeras.
Stop the presses because iPod sales which produces less in revenue than iTunes is now slowing. And it wouldn’t be so bad if the press merely only reported these inconsequential facts. But it’s not just that. It’s the highly misleading and faulty conclusions drawn from these inconsequential facts that has been so damaging for the stock over the years. If it isn’t the Zune iPod killer, or the Android iPhone Killer, then it’s the Amazon Kindle Fire iPad Killer which amounts to nothing less than the obvious end of Apple. Forget about reporting the actual facts or the news, everything is now editorialized.
No one cares to report that iPhone sales outpaced the market by 400% or how extraordinary it is for a company of Apple’s size to see accelerated revenue growth of 66% leading to sales of $108 billion in 2011. Or that you would have to go back to 2004 when Apple was reporting less than $1.00 in EPS to find a year with a higher EPS growth than the 82.71% Apple recorded in 2011. True story. See below.
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The Apple Fiscal Q4 Survival Guide
Sunday, October 9, 2011
By Andy M. Zaky
Last quarter, we put together a massive guide covering everything you needed to know to capitalize on Apple’s fiscal Q3 2011 results released on July 19, 2011. We nailed almost every single aspect of that quarter and we’ll probably do the same thing for fiscal Q4 as well. The material outlined in this “Fiscal Q3 Earnings Compendium” and in the “Mastering Apple’s Performance Post-Earnings” is still very much relevant to Apple’s fiscal Q4.
In fact, many of the same principals and data are directly applicable to fiscal Q4 and we will be using a lot of the same data. We will also be adding to that data. In chapter 1, we outline the basic conclusions we were able to draw regarding Apple’s stock performance based on a very detailed analysis of the historical record. It is important that you familiarize yourself with those axioms if you want to get really comfortable in understanding how Apple performs on the release of its earnings. Most investors are completely in dark when it comes to what to expect heading into Apple’s report. This page will shed quite a lot of light on what Apple is likely to do when it reports earnings.
Fortune’s Philip Elmer-DeWitt runs a very exhaustive and excellent earnings preview covering what the very best in the industry believe Apple is going to report when it releases its results. For the most part, those analysts are very good at forecast Apple’s earnings. But where they fall short, and where Bullish Cross shines, is in being able to predict that which matters most. And that is accurately forecasting what the stock price will do when it release those results. That’s what is precisely where we take over. We all know Apple has great earnings, we all know Apple’s fundamentals are impeccable, we all know the valuation is compelling but very few have the ability to determine how the stock is going to perform. That is what this Apple Fiscal Q4 Survival Guide is all about.
In Fiscal Q3 2011, we predicted that Apple would rally to $400 a share before the end of July (check), we forecasted that Apple would see $404 and change in after-hours when it reported (check), we forecasted that Apple would not see those reactionary highs the following morning (check), we forecasted that Apple would set its high of the day right at the opening bell at around the mid-$390′s (check) and we forecasted that the stock would be lower than that opening price the day after earnings ($396.12) 4-weeks later (check).
In this Fiscal Q4 Survival Guide, we’re going to give that same level of detail, we’re going to be arriving at very concrete conclusions, and we’re confident that we will nail exactly what Apple is going to do when it reports its Fiscal Q4 results like we did with Fiscal Q3.
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Fiscal Q1: Bullish Cross +30.47% v. S&P 500 -10.60%
Friday, September 23, 2011
By Andy M. Zaky
When Bullish Cross 2.0 went live in mid-June we created different model or “hypothetical” portfolios in order to demonstrate to our members how to execute a lot of the strategies we discuss on a day to day basis. Three of these portfolios were introduced on Friday, June 17, 2011 while the fourth portfolio was introduced on Friday, August 26, 2011. We continue to put together different models whenever we want to demonstrate how to execute some major investment strategy.
In terms of the performance of these portfolios, we are absolutely crushing it. As of the close on Friday, September 23, 2011 — just about 3-months after introducing these portfolios — Bullish Cross is up a cumulative total of 30.47%, which is actually pretty incredible considering the fact that the S&P 500 is down just about 10.6% over the same exact period.
The cost basis of these Bullish Cross Model Portfolios in total is $4,320,000.00. If someone invested that $4.32 million in the S&P 500 at the moment that Bullish Cross introduced its model portfolios, that person would be down just about half a million dollars ($457,920.00). Their account value would have dropped from $4.32 million to $3.86 million in just 3 months time.
Yet, if this person had hypothetically decided to invest that capital with Bullish Cross instead, he or she would be up $1.316 MILLION and have an account valued at $5,636,085.00. That is a 41.07% difference between how the S&P 500 has performed, and how Bullish Cross has performed over the last 3-month period.
Moreover, even with this outperformance, Bullish Cross holds a massive amount of its portfolio in cash on the sidelines. In fact, over $1.9 million or 33.7% of the $5.636 million overall portfolio is held entirely in cash. The chart below compares Bullish Cross to the S&P 500 since June 17, 2011 when the portfolios were introduced. Please notice that while the September 23, 2011 comparison to the S&P 500 is perfectly accurate, some of the historical points are very close estimates. The September 23, 2011 NAV is exactly accurate however. And that’s all the matters in the end:
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Apple to Report $40 Billion in Revenue in Fiscal Q1 2012
Thursday, September 1, 2011
By Andy M. Zaky
For the entire 2009 fiscal year, Apple reported $9.08 in earnings per share on $42.9 billion in revenue. At the end of the year, the stock was trading at $210 a share. Jump to fiscal Q1 2012 and investors will be shocked to learn that Apple will likely report around $11.05 in EPS on nearly $40 billion in revenue in fiscal Q1 2012 alone. That is 23% more in earnings than all of 2009 combined.
In terms of cash-flow, I’m expecting Apple to add $15 billion in cash for the quarter which will bring the Apple Federal Reserve Bank of Cupertino to $103.5 billion in total cash. That will be quite the headline when Apple reports its fiscal Q1 2011.
Think the stock will be above $400 a share on that news? The January 2012 $380 – $400 call-spread trades at $10.00. If Apple closes above $400 in January, that’s a 100% gain. The table below outlines Bullish Cross expectations for Apple’s Fiscal Q1 2012. I’ve re-published our Fiscal Q4 2011 expectations tonight as well. Please read both.
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Chapter 2: The General Thesis for the Apple 10-Bagger Strategy
Thursday, August 18, 2011
By Andy M. Zaky
This article will present a broad overview of the Bullish Cross Apple 10-Bagger investment thesis. There are a lot of moving parts that we will need to spend some time on. For example, in a subsequent piece, we’ll discuss the issue of risk assessment and asset allocation.
The issue of exactly how much should one set aside for this investment thesis will be taken up in one of the early chapters. If you have $100,000 set aside to invest in Apple specifically, how much of that $100,000 in capital should one attribute to this particular thesis?
What if you’re currently holding the 2013 $400 – $500 call-spread? Should you sell any of that position? What if you’re already fully invested in Apple, should you add more to the overall Apple investment or should you sell some of your current position in order to capitalize on this thesis? We’ll take a look at all of these issues and more in the upcoming chapters.
For now, we want to be concentrating on the thesis itself and how the trade can potentially unfold. So this particular article will focus solely on how we intend to execute the investment thesis and then we’ll move to further depth over the next week or so.
In the next piece, we’ll discuss what happens if one or more of the trades fail, the level of risk involved in the trade and how much should be allocated to the thesis given the risk profile of each trade independently and of the thesis as a whole. So let’s take a look at how Bullish Cross intends to create a 1,000% gain over the course of the next 15-months — maybe earlier and maybe even greater gains.
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Chapter 1: Preamble to The Bullish Cross Apple 10-Bagger Strategy
Thursday, August 18, 2011
By Andy M. Zaky
As the market continues its second leg down, I think it’s time for Bullish Cross to refocus its efforts back to covering Apple. So much has taken place since Apple reported its fiscal third quarter results, and we now need to review a lot of that material.
Moreover, given the amount of strength we saw in Apple on this August crash, it is absolutely clear that the thesis underlying the January 2013 call-spreads have been significantly bolstered. If you had any concerns that Apple might not make it to $500 – $600 a share by 2013, those reservations should be completely gone in light of the strength we saw during the first leg down, and on today’s sell-off as well (August 18).
The S&P 500 lost nearly 250-points — 18.5% in less than 15-trading session in early August. During that same period of time, Apple lost a mere 12.9%. In the financial crisis, Apple far underperformed the S&P 500 in basically the same sell-off. While the S&P lost 30% during the peak of the crisis in September 2008, Apple lost 60% of its value in the same period.
What this should tell you is that we’re dealing with a new and improved Apple. We now have an Apple that doesn’t fall uncontrollably due to a general lack of understanding by the institutions holding the company. Instead of selling Apple as a source of cash-liquidity in crisis mode, institutions are looking for other things to sell. That has never been the case as long as I’ve analyzed Apple.
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