Activist investing and special situations.

What To Make Of Apple (AAPL)

Added on by Lee Ho Fook.
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Be sure to check out our detailed stock analysis (click here). Apple (AAPL) hit an all-time high back in September, briefly trading above $700 before tumbling to below $450. I have been racking my brain on whether now would be a good time to back up the truck and load up on Apple stock, but perhaps a "wait-n-see" philosophy would be best for now? Or is now the time to buy up some Apple shares? I am leaning more toward the "buy" scenario, believing that there are is more evidence for "buying" versus "selling".

But why the huge downswing during the fourth quarter? There is the obvious, where the signaling of slowing growth appears to have led to a vicious cycle of "smart money" selling because other "smart money" investors are selling. But there is another case to be made, heeding the advice of billionaire Warren Buffett, "buy when everyone else is selling."

The Smart Money Move

There were a few billionaire hedge fund managers that were selling off their entire stakes of Apple during the fourth quarter. However, just as these hedge funds were getting out of Apple, there were other notable ones that were getting even deeper into Apple.

While betting with the 'smart' money is not always the best bet, neither is betting against it. One of Apple's biggest backers of the fourth quarter was David Einhorn, who made an effort to put pressure on the company to return cash to shareholders. All three of the big billionaires that were taking a renewed interest in Apple: Griffin, Tepper and Einhorn, all have the stock as their largest holding as of the end of 2012. David Tepper was the top earning hedge fund manager in 2012, pulling in $2.2 billion after his Appaloosa Management hedge fund returned 30% for the year. As far as smart money is concerned, I tend to be in favor of those betting on the tech company. For those that would rather go against smart money, they can take solace in the fact that during the fourth quarter Apple dropped from the top spot as the "most-owned stock by hedge funds", conceding to AIG.

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