Category Archives: Apple Articles

When Bullish Cross 2.0 went live in mid-June we created different model portfolios in order to demonstrate to our members how to execute a lot of the strategies we discuss on a day to day basis in our Bullish Cross Live blog.

In terms of the performance of these “Model Portfolios” — portfolios based on hypothetical paper money trades — we are absolutely crushing it. As of the close on Friday, February 10, 2012 — just about 8-months after introducing these portfolios — Bullish Cross is up a cumulative total of 70.07%, which is actually pretty incredible considering the fact that the S&P 500 is up only 5.80% over the same exact period.

The cost basis of these Bullish Cross Model Portfolios in total is $5,320,000. If someone invested that $5.320 million in the S&P 500 at the moment that Bullish Cross introduced its model portfolios, that person would only be up $308,560. Not a terrible 5.80% return over the last 8-month period. Their account value would have risen from $5,320,000 to $5,628,560 million in just 8-months time.

Yet, if this person had hypothetically decided to invest that capital with Bullish Cross instead, he or she would be up $3.728 MILLION and have an account valued at $9,047,907.50. That is a 64.27% difference between how the S&P 500 has performed, and how Bullish Cross has performed over the last 3-month period. The subscription to the publication costs roughly $150 a month right now. If someone had paid that $150.00 a month since June, it would have cost them $1,200.00 over that period of time. That $1,200 would have bought them 64.27% outperformance on the S&P 500. The chart below compares the Bullish Cross Model Portfolios to the S&P 500 since June 2011 until February 2012 (click to enlarge):

What’s more, for those who are Apple-specific investors, our Apple model portfolio is up 111.48% since June while Apple from the exact low in June is up only 60%. So those who invested in Apple, would have gained 60% since June. Yet, following the publication’s advice, they would be up 111.48% almost doubling the performance in Apple. What’s more, the Bullish Cross Apple Model Portfolio, almost always holds at least 20% in cash in most cases. Right now, the portfolio holds more than 50% of its assets in cash given Apple’s massive run since june. So the average Apple investor who came to the publication in June, bought himself/herself an extra 60% return over the period.

And this doesn’t even take into account the fact that we added multiple Apple portfolios and different strategies as we went along. Back in June, we outlined a 500%-return investment thesis which at this current point is up 245.98%. As long as Apple closes above $500 a share by next January (we’re already almost there), those who invested in this thesis will make just about 500%. For those who invested in the Apple 2013 $400 – $500 call-spread when we recommended it on June 17, 2011, they are up 245.98% as of the close of trading on Friday. See below (click to enlarge):

We are covering everything you need to know about Apple’s fiscal Q1 2012 Earnings due out after the close of trading on Tuesday, January 24, 2012 in our multi-chapter report entitled the Fiscal Q1 2012 Earnings Compendium. We are expanding our 25-Chapter analysis published in fiscal Q3 and fiscal Q4 2011 by adding 5 more chapters in fiscal Q1. We now have this down to a science.

Enter the Apple Fiscal Q1 2012 Earnings Compendium

On October 1, 2011, we published a 12,000-word (24 Single-Spaced MS-Word pages) article entitled The Apple Game-Plan for October which basically laid out what we expected to see out of Apple and how to position before and after the iPhone 4S event. If you go back and look at that October game-plan, you will see that everything played out precisely as planned. We got everything we wanted and Apple traded exactly as we expected it to.

We have high expectations that this Apple Game-Plan for December & January will provide a lot of guidance and a good plan for the next few months. The point of this article is to offer up a general thesis for how to position in the various Bullish Cross portfolios and to provide information that we think is important for determining the short and intermediate-term direction of the stock going forward.

The research we’ve conducted for this report has produced some extraordinary information regarding how Apple tends to perform and trade during different time-periods in the quarter. You’re going to be pretty surprised what the analysis indicates regarding Apple’s performance for December and January.
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Thursday, November 17, 2011 — After Apple fully recovered from the depths of the financial crisis to make fresh all-time highs in early 2010, the stock began its very long period of P/E compression. All maturing growth stocks undergo the painful process of P/E compression. In some cases, this process will happen way before the company actually begins to slow down from a growth perspective.

In some rare tragic cases, some growth companies will go through a period of premature P/E compression as a result of Wall Street failing to adequately understand the company or the market in which the company operates. Unfortunately, Apple does fall within this subset of tragic cases.

Even thought the company recorded accelerated revenue growth in 2010 and much of 2011 as well as very explosive earnings growth, Wall Street has felt the company’s growth topped out sometime in 2007. Since 2007, Apple has struggled to maintain a P/E or PEG ratio that is anywhere close to commensurate with its growth rate or reasonable forward expectations.

Year after year Apple has reported an earnings and revenue that is on average about 50-70% above Wall Street initial expectations heading into the year. And every year, Apple trades at a depressed valuation. For example, heading into fiscal 2011, Wall Street analysts were expecting Apple to report $17.34 in earnings per share on $75 billion in revenue on the year. Apple reported $27.68 in earnings per share on $108.25 billion in revenue. That represents a 59.64% earnings beat and a 44.33% revenue beat on Wall Street’s earnings expectations heading into the year. This was Wall Street’s expectation on the first day of fiscal 2011. This after Apple reported an 80% earnings beat on Wall Street’s earnings expectations for 2010.
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Tuesday, November 15, 2011 — In Chapter 5, we detailed the inherent limitations of financial analysts and how those limitations impact the accuracy level by those analysts in forecasting Apple’s P/E ratio. We also detailed the principle of using “Reasonable Conservatism” to model, forecast and invest based on determining where Apple’s floor might be. Instead of investing on high Apple can go at the most aggressive end of the spectrum, investors should formulate their investment strategies based on their well-reasoned determination of where the floor happens to be with Apple.

In this chapter, we get into the actual elements that go into the forecasting models that try and predict Apple’s future P/E ratio. FIrst, let me say that this is an extraordinarily complex and often-time, a subjective science. While earnings is very data oriented, forecasting Apple’ P/E ratio requires a lot of very subjective conclusions. People can disagree on the scope as well as the degree of impact that these different elements have on Apple’s overall P/E ratio. Yet, experience goes a very long way in being able to accurately assess each of these elements appropriately.

Many of you won’t agree with me on the conclusions I draw and that’s totally fine. I’m extremely confident both in my abilities, and on my handle of the material. This all will come down entirely to your depth of experience with the equity markets. This is why extraordinary financial analysts tend to fail when it comes to forecasting P/E ratios. They simple cannot wrap their mind around or simply do not have the requisite experience to properly assess the subjective market analysis component of the equation — which is probably the most important in this case. Let’s begin. In no particular order, these are the elements that impact and determine Apple’s trailing P/E ratio and which should be thought about when forecasting future trailing P/E ratios:
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