Before the iPhone 5 announcement, we cut our AAPL position
in half (approximately $670) to take profits and eliminate the risk of
underperformance after the iPhone release. This is precisely what happened and
on October 12th (price $630), we reevaluated the situation and
decided to double down on the position ahead of the iPad mini announcement and
Q4F2012 earnings. Unfortunately, a number of factors caused the stock price to
decline 4% (our stop loss for this particular trade), including iPad mini
margin concerns and general fears about the upcoming earnings announcement. Management
seemed to drive a point home throughout the conference call: results could be
rocky in the short term, but the company is well positioned to take advantage
in the long term as costs decline and production inefficiencies abate (see
earnings release). Therefore, at this point we are withdrawing from the ST
trade at the stop-loss point that was created at the inception of the trade
($605). Our LT AAPL thesis remains in tact, leaving us with a normal weighting
position going forward.
-Joe Esposito
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