Continuation from yesterday…..
In the case of Apple, if you were fortunate enough to take a long position in 2003 it would not have been an easy ride up. As suggested above, the stock had suffered a 60% drop in 2004, another 60% drop during the financial crisis of 2007-2009 and a 45% drop in 2012-2013.
Would most investors be able to hold on to their Apple stock while going through such massive sell offs?
It is highly unlikely. Most of us would not be able to sustain such massive drops without first getting out. Most likely at exactly the wrong time. Well, that is unless you were in a comma during the time or if Apple Inc represented only a small portion of your overall well diversified portfolio. For the rest of us, neither one is likely to be the case. That is why a proper application of set trading rules becomes so important. So much so, that in many cases it can easily double or triple the overall return on the underlying stock. Easily turning Apple’s 37 bagger into a 60 bagger over the same period of time. Once again, please check our Tenbagger Trading Rules & Maximizing Returns chapter for more information.
CONCLUSION:
Apple, Inc gave us plenty of signs that its stock price was about to stage a substantial rally from its 2002-2003 bottom. Why we would not be aware of the extent of the rally at the time, it would have been wise to ascertain that the rise would be substantial. Here is why.
First, as our fundamental analysis above showed, an analyst working with Apple would be aware of iPod’s growing popularity and the real possibility of iPod becoming a runaway hit for the company. And while iPod’s parabolic growth trajectory was still unknown, it could have been anticipated as one of the possible growth rates. Further, while the rest of the Apple’s revolutionary products where at least 5-years away at the time, investors could have assumed that Steve Jobs’s insatiable drive for innovation would ensure that Apple will continue to introduce new revolutionary products well into the future. While not a clear cut case for a guaranteed future success, it provided a positive fundamental framework for investing in Apple at the time.
Our investment case for Apple gets even stronger at the 2003 bottom and after the realization that Apple’s stock price is selling at a multi-decade low. Primarily due to the Nasdaq’s collapse and a slump in the tech sector. An analyst familiar with the cyclical composition of the overall stock market would know that the bear market of 2000-2002 was over and that the Nasdaq was about to stage a multi-year rally. Since Apple’s stock price has synchronized with the overall market, it would have been safe to assume that Apple’s stock price would push higher as soon as the market does. Suggesting that investors should seek out a good entry point. A point that was clearly defined on a chart in April and May of 2003.
Separately, neither fundamental, technical nor timing analysis would allow us to take a position in Apple’s stock. Yet, when we combine all of these factors together we get a high probability setup as it becomes evident that Apple’s stock price is likely to outperform the market by a large margin. From both the fundamental and the technical side. While not a sure bet, this case presents us with a clearly defined low risk and a high ROI opportunity.
Final Prescription: Fundamental Analysis + Technical Analysis + Timing Analysis = A Massive ROI.
How You Could Have Made A Fortune Investing In Apple (AAPL) Google