Buy Apple (AAPL) in my Jubak’s Picks portfolio

Sellers of Apple (APPL) yesterday—and really since Apple’s intraday high of $644 on April 10—look like they’re trying to get out in front of an expected slowdown in iPhone sales in the June quarter. The thinking is that consumers will hold back on purchases of existing iPhones because Apple is expected to release a new model in October. Rumor and industry intelligence say that the new iPhone will be the physical redesign that the 4S, introduced in 2011, wasn’t. The big changes are predicted to include an upgrade to a 4-inch screen from the current 3.5-inch screen and the ability to use the faster 4G networks being expanded by AT&T (T) and Verizon (VZ) and other cell phone companies.

The Wall Street Journal has reported that production for the new 4-inch screens for the iPhone could begin as early as June at LG Display, Sharp, and Japan Display. Combining Apple’s Retina display technology, now on the iPhone 4S, with a bigger screen will be Apple’s attempt to leapfrog the larger screens that have been available on some Android phones.

It’s no surprise that the introduction of a new iPhone model can slow sales of existing models. In the company’s fiscal fourth quarter in 2011—the company’s fiscal year ends in September—sales dropped as customers waited for the iPhone 4S. And in April Apple told investors to expect a decline in sales for the current fiscal third quarter.

Sellers, and much of the selling has come from hedge funds, seem to be thinking that they can take profits now and then get back into Apple on weakness when less sophisticated investors decide to sell on that predicted drop in iPhone sales. Read more

“A secular sideways market.”

That’s the best succinct description that I’ve heard so far of the stock market we’re in. It comes from Jack Ablin, chief investment officer at Harris Private Bank, at a panel that we shared at the recent Las Vegas MoneyShow.

At the same conference, Sam Stovall, the chief equity strategist for Standard & Poor’s Capital IQ Equity Research Department on another panel I had the privilege of sharing, peered into his crystal ball and offered that the gain on the S&P 500 would be about 4% in 2012. With lots of volatility—so much so that this year, Stovall told Bloomberg, that a 5% move should just be considered “noise.”

It’s reassuring to me these two smart market analysts see something like what I’ve called the “New Paranormal” market http://jubakpicks.com/tag/paranormal/ in my March 2 post. In my paradigm that market is characterized by lots of volatility but not much net gain—Ablin’s “sideways”—and achieving an annual return of 5%–Stovall’s 4% for 2012—should be considered a major achievement. This is still a paradigm under construction (and I’ll post a link for you to get a copy of its latest revision from the MoneyShow on May 16 on my http://jubakpicks.com/ site in the next few days.)

But watching the market action and listening to investor sentiment over the last few days has already suggested a new element to add to the model. It’s what I’m calling the Dangers of Deflationary Investor Sentiment. And I think it’s a major obstacle to achieving even the 4% to 5% returns that characterize a secular sideways market.

So let me start by telling you what this is, why it’s dangerous, and what to do about it. (Along with a few stock picks for execution during this current sell off.) Read more

What price Apple (AAPL)?

For the short-term I think the options market is a better guide than the fundamentals in Apple’s March quarter earnings report of April 24.  After falling by 12% in the run up to earnings—from $636 on April 9 to $560 on April 24—the stock climbed 9% on April 25, $50 a share. No way that kind of volatility is a result of earnings fears and then earnings news (even with a $2.26 a share positive surprise) unless the news was magnified by big bets in the options market on Apple.

All the evidence points says that traders who had placed bearish bets using options that the stock would fall further on earnings got caught on the wrong side of that bet when Apple issued its positive surprise. Their scramble to close that trade—by buying shares or options on the other side of the trade—certainly provided a big part of the $50 a share jump on Wednesday. (Trading volumes in Apple option contracts hit 1.35 million on April 25, up from 1.26 million contracts the day before.)

What’s the options market telling us now about the short-term bet on Apple? Read more

Apple beats by $2.26 a share for the March quarter and then guides lower for the June quarter–just as Wall Street cynics had expected

What do you know, the cynics that expected Apple (AAPL) to report a big positive surprise on April 24 for the March quarter in order to offset lower guidance for the third quarter were dead on. Although the surprise was even bigger than Wall Street analysts who made that call like Morgan Stanley’s Katy Huberty expected.

In afterhours trading on April 24 Apple’s shares were up 7.27%.

For the March quarter, the second quarter of Apple’s fiscal year, the company reported earnings of $12.30 a share. That was $2.26 a share above the Wall Street consensus of $10.04.

Revenue climbed by 59% from the March quarter of 2011 to $39.19 billion versus the Wall Street estimate of $36.76 billion.

For the quarter sales of iPhones at 35.1 million—an 88% growth rate–blew away consensus projections of 30.5 million and even the Wall Street whisper number of 34 million. IPad sales at 11.8 million came in light of Wall Street estimates of 12 million, not surprising in view of well-publicized component shortages and still a 151% increase year-to-year. As expected sales of Mac computers declined: at 4 million sales didn’t even meet Wall Street’s projections for 4.5 million units. Mac sales were expected to lag because Apple hasn’t refreshed the line recently.

Gross margins of 47.4% humbled Wall Street estimates of 42.7% and the company’s own guidance of 42%.

And then came the expected lower guidance for the company’s June quarter. Read more

Buy Nokia (NOK)

You sure can’t say Nokia (NOK) isn’t pulling out all the stops to win back market share.

The company has announced that its U.S. retailer AT&T (T) will start selling its Lumia 900 smartphone, running Microsoft’s (MSFT) Windows Phone operating system, for $99.99 on April 8. That pushes the price (with a two-year contract) to half of the cheapest iPhone and Android phones.

On March 28 Nokia announced that starting in early April its Lumia 800C will be available from China Telecom (CHA). In the second quarter the company’s Lumia 900, 800, 710, and 610 models will be sold by China Unicom (CHU). A phone for China Mobile (CHL) is still in the works.

At the end of February Nokia made its first ever appearance at the annual Mobile World Conference in Barcelona where the company introduced six new phones built on its new Microsoft Windows Phone operating system. Not bad for the first year of the company’s new partnership.

Does all of this mean Nokia is back?

No way. At least not in 2012. The company is still bleeding market share in both the high-end smartphone market and in the mid-level feature phone market. The company’s share of the smartphone market could fall to 6% by mid-2012 from an already depressed 12% at the end of 2011. Operating margins are still falling and revenue is forecast to decline again in 2012.

But there are signs that new CEO Stephen Elop could see his strategy stabilize market share in 2013 with about 13% of the global smartphone market. That’s not enough to make Apple (AAPL) or Samsung quake in their boots or to restore Nokia’s stock to the $14.21 it sold for on April 6, 2010 or the $34.51 of November 6, 2007), but I can see $7.80 a share in a year. That would be a 44% gain from the March 29 price of $5.42.

Which is why I’m adding Nokia to my Jubak’s Picks portfolio today, March 30 http://jubakpicks.com/the-jubak-picks/

Why does Nokia stand a chance of recouping even that much of the market and its share price? Read more