Bullish Cross

Thursday, May 17, 2012 — Since 2006, Bullish Cross has only ever published four public buy ratings on Apple. The last such rating was published at the end of the day on Friday, June 17, 2011 and Apple capitulated and bottomed on Monday, June 20, 2011.

Today, we are initiating our 5th ever buy rating on Apple just about 11-months after the last recommendation we gave. We tend to only publish these buy rating under extraordinary circumstances, when Apple has been extremely oversold and when the stock’s valuation has become incredibly depressed. We also only publish these ratings once the markets have seen a substantial sell-off or prolonged period of consolidation.

The current conditions meet all of our criteria. As a result we are publishing our comments on why it is time to buy Apple. Notice that the last four buy ratings were made right at or near the exact lows each time. Our buy ratings are a little different than what one would normally expect in that we give a band where we feel the stock is a “strong buy” and where the stock is a “buy.” We also give a price target. But what we don’t do is publish an ongoing buy rating. Our buy ratings are thus temporary in nature.

Bullish Cross has never missed a long-term price target on Apple as you can see here. Today we feel that Apple is a strong buy anywhere between $500 and $530 a share and a buy between $530 and $550 a share. We expect Apple to test $750 a share sometime before the end of this coming January. That is roughly 50% higher than where the stock is trading today.

Now here are the reasons why we believe its time to buy Apple and why we feel the valuation is incredibly attractive today. At $533.52 a share, Apple trades at 13x last year’s earnings and at only 10.56x our expect October earnings. Those are incredibly low valuations even for Apple. At the November 25, 2011 lows, Apple traded at a 13.13 P/E ratio. So today, Apple is trading at a lower valuation than it was at the November lows. At the June 2011 lows, Apple was trading near a 15 P/E trailing P/E ratio.
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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