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How to Profit From Wall Street's Biggest Gaffe in Decades

I was perusing the newswires a few weeks ago when the following Reuters news story headline all but physically grabbed my attention.

It stated: “Exclusive: Morgan Stanley Rebuilds in Commodities Trading.”

Most folks probably looked at this and tossed it off as just another of the endless machinations of Wall Street.

But I knew better…

  • Apple stock

  • The Apple Stock Drop: What You Need to Know (Nasdaq: AAPL) As Apple Inc. (Nasdaq: AAPL) stock continues its seven-week tumble, investors want to know what is likely to happen next.

    Since hitting an all-time high of $702.10 on Sept. 19, Apple stock plunged $155.04 --more than 22% to close at $547.06 on Friday.

    Investors have gotten little help from Wall Street analysts, who have offered diametrically opposed opinions on where AAPL is headed.

    Among the prominent bears is Doubleline Capital CEO Jeff Gundlach, who predicted on Thursday that Apple stock would continue all the way down to $425. He said that's about where AAPL was when it started its dramatic climb in January, and he expects it to return to those levels.

    Gundlach is down on Apple because he thinks the Cupertino, CA-based company's new products are no longer cutting edge.

    "I'm really struck by this mini iPad thing as if that's any kind of a product innovation," Gundlach told CNBC."Once you just start changing the size of your products, I really think you're not exactly innovating."

    Meanwhile, some Apple bulls insisted the stock will not only bounce back, but eventually will reach beyond $1,000 a share.

    Brian White, an analyst with Topeka Capital Markets, said in a note to clients on Thursday that he's keeping his $1,111 price target on AAPL.

    "We believe that those investors that have missed the Apple rally over the past year are presented with a very attractive entry point heading into the strong holiday news season," White wrote.

    So which story are Apple investors to believe?

    To figure that out, let's take a closer look at what's been going on.

    To continue reading, please click here...
  • How to Know When to Sell Apple Stock (Nasdaq: AAPL) Trying to figure out when to sell Apple stock (Nasdaq: AAPL), particularly given its spectacular performance over the past several years, is a major dilemma.

    If you're long on AAPL, you're no doubt trying to sort through a lot of conflicting signals.

    With AAPL down about 16% from its high of $702.10 on Sept. 19 amid a wave of negative news, some financial pundits are calling a top and urging Apple investors to sell Apple stock.

    Trouble is, they've done this many times before during Apple's long climb. Sometimes it's after AAPL hits a new high, and sometimes (like we're seeing now) it's after the stock dips in reaction to some bad news.

    But investors who opted to sell Apple stock in years past lived to regret it.

    Back in 2010, for example, when AAPL breached the $300 mark, plenty of bears urged shareholders to rush for the exits.

    Any who followed that advice missed out on a 100% gain.

    At the same time, Apple stock can't keep rising forever. No company can maintain the sort of exponential growth necessary to fuel the kind of gains Apple has enjoyed over the past few years.

    But the big question is when this will happen. Now? Next quarter? Next year? 2015?

    And as if that weren't enough to make an Apple investor's head spin, there's the added stress of volatility.

    From late November to early April, AAPL soared $270, an astounding 75% increase in just four and a half months. Then it fell $100 in the next five weeks.

    With turbulence like that, retail investors easily can get heartburn trying to figure out when to sell Apple stock.

    That's why we put together some guidance.

    To continue reading, please click here...
  • Apple iTunes Radio Service Doesn't Leave Pandora Any Hope Fresh reports that a long-rumored Apple iTunes Radio Service will arrive in February have caused shares of Pandora Media Inc. (NYSE: P) to swoon over the past two days.

    Yesterday the selloff was so abrupt it triggered two circuit breakers that briefly halted trading in Pandora stock. Shares closed at $8.20 yesterday (Thursday), down nearly 12%, and have edged lower today.

    The Bloomberg News report yesterday afternoon indicated Apple Inc. (Nasdaq: AAPL) is very close to a deal with the major record labels that will enable it to launch a very similar ad-based music streaming service.

    Fears of such a service, possibly called iTunes Radio, drew the quick and nasty negative reaction on Wall Street.

    "If the Apple radio rumors are true, Pandora has every reason to be scared - terrified, even," wrote Tom Cheredar in a commentary for Venture Beat.

    Here's why.

    To continue reading, please click here...
  • Forget Q4: Apple (Nasdaq: AAPL) Earnings Must Deliver in December Even though Apple Inc.'s (Nasdaq: AAPL) earnings for Q4 aren't yet out - they'll be announced after Thursday's market close - the company is much more concerned with beating last year's spectacular December quarter, the company's fiscal first quarter.

    Apple's Q1 earnings last year blew past all expectations. Apple earned $13.87 per share - more than doubling the profit from the year-earlier quarter -- by selling a record 37 million iPhones and 11 million iPads.

    And Apple is going to need the profits from every gadget it can sell if it hopes to top that benchmark.

    That's why all eyes were focused on the long-anticipated iPad Mini yesterday (Tuesday), but the real story was the avalanche of product updates unleashed just in time to supercharge for its critical December quarter.

    In addition to the Apple iPad Mini, the special event in San Jose, CA, included the surprise announcement of the fourth generation iPad, a revamp of the iMac and Mac Mini desktops, and a the upgrade of the 13-inch MacBook Pro laptop to a high-res Retina display.

    "We're not taking our foot off the gas," said Apple CEO Tim Cook.

    When taken together with the iPhone 5 launch and the upgrades to the iPod Touch and iPod Nano just last month, it adds up to an uncharacteristic bunching of product updates.

    It means lots of fresh Apple gear in stores for the holidays, historically the company's biggest quarter of the year.

    Why Apple (Nasdaq: AAPL) Needs Great Q1 Earnings

    In a sense, Apple has become a victim of its own success.

    The explosive growth of Apple earnings, driven by the explosive growth of iPhone sales (and that product's huge profit margins), has made huge earnings increases routine.

    But Apple knows the tough comparisons to year-ago quarters will get Wall Street's attention.

    And as Apple's growth rate slows, so will the rise of the stock.

    To continue reading, please click here...
  • Apple iPad Mini Doesn't Need to Be a Cash Cow to Be a Winner While it won't rake in iPhone-style profits that could drive Apple Inc. (Nasdaq: AAPL) stock to new heights, a smaller iPad - the iPad Mini - is a smart and necessary strategic move.

    The Apple iPad Mini does not yet exist, but recent reports say its arrival is imminent.

    According to Fortune, invitations to an Oct. 17 iPad Mini introduction event are expected to go out Oct. 10, with the product likely available to buy in early November.

    That was buttressed by a The Wall Street Journal story two days later that reported Asian suppliers had "started mass production" of an iPad Mini with a 7.85-inch screen.

    Instead of celebrating a fresh source of Apple profit, however, some on Wall Street aren't thrilled by a smaller iPad.

    They're worried that iPad Mini will hurt AAPL's margins, which have risen steadily along with sales of the high-margin iPhone.

    But this theory just shows how The Street is missing the big picture.

    To continue reading, please click here...
  • Why Apple (Nasdaq: AAPL) Won't Ditch Controversial Foxconn Apple Inc.'s (Nasdaq: AAPL) position as an iconic brand, as well as a Wall Street darling, doesn't mean its image stays squeaky clean.

    The company suffered a PR headache this week when a worker riot broke out at one of the Chinese factories run by Foxconn, the company that assembles the majority of iPhones and iPads.

    The riot, which involved about 2,000 workers, occurred late Sunday at a Foxconn factory in Taiyuan. Analysts attributed the riot at least in part to the same stressful working conditions that led to several suicides in 2010.

    Complaints about long hours, low pay, and draconian management at Foxconn's many factories have persisted for years, and reflected negatively on the usually-lauded Apple.

    Although Foxconn assembles devices for most of the world's top consumer electronics companies -- including Sony Corp. (NYSE ADR: SNY), Hewlett-Packard Company (NYSE: HPQ), Dell Inc. (Nasdaq: DELL), Cisco Systems Inc. (Nasdaq: CSCO), and Microsoft Corp. (Nasdaq: MSFT) -- whenever a worker crisis erupts, the focus is all on Apple.

    The net result is that Apple - which just launched its biggest product of the year, the iPhone 5, this past weekend - gets tainted by association every time there's trouble at Foxconn.

    Over the past several years, that's happened with increasing frequency.

    "These workers must be treated with respect," New York-based watchdog group China Labor Watch said in a statement. "And both Apple and Foxconn, with billions of dollars in profits every year, have both a legal and ethical obligation to uphold the rights of these workers."

    Clearly Apple would rather avoid these nasty surprises, but a complex combination of factors will keep it lashed to Foxconn for years to come.

    To continue reading, please click here...
  • Apple iPhone 5 Now a Golden Goose for Verizon and AT&T Since the debut of the iPhone in 2007, the profit parade has mostly been a one-way street - but after five years, the major wireless carriers finally figured out how to make money with the Apple iPhone 5.

    That means another way for you to make money from the iPhone 5, without having to buy Apple Inc. (Nasdaq: AAPL) stock.

    Apple has raked in billions while first AT&T Inc. (NYSE: T), and later Verizon Communications Inc. (NYSE: VZ), and Sprint Nextel Corp. (NYSE: S), had their margins slammed by the huge subsidies they sent to Cupertino.

    But evolving consumer habits and the Apple iPhone 5's addition of LTE network technology will soon change that in a big way.

    The carriers are hoping the much higher data transfer speeds of LTE - approximately 10 times faster than 3G - will coax iPhone 5 owners to use more data-heavy functions, particularly video.

    "With these great networks coming on, [data] usage is going to go up. Revenues will go up," AT&T Chief Financial Officer John Stephens said at recent media and communications conference.

    While the carriers will still have to fork over the same fat subsidies to Apple they always have, the new data equation means they'll make the money back much more quickly. And that will translate into bigger profits.

    To continue reading, please click here...
  • Why the Apple iPhone 5’s Lack of Killer Features is Pure Genius Tech critics predictably pounced on the new Apple iPhone 5 yesterday (Wednesday) even before its debut event had ended.

    As often happens with Apple Inc. (Nasdaq: AAPL) product introductions, many had hoped for more whiz-bang new features.

    "Apple's Phone has been a trendsetter for half a decade. Now the question is whether it can avoid becoming a bore," lamented The Wall Street Journal.

    The Apple iPhone 5 did get a bigger 4-inch screen, 4G LTE connectivity, and a faster A6 processor. But months of rumors and speculation had raised expectations for more dramatic enhancements.

    Apple easily could have included some of those much-desired features, such as a mobile wallet chip (also known as NFC, or near-field communications), wireless battery charging, or biometric security (using your voice or fingerprint).

    Amid the din of criticism, few are asking why Apple would leave such goodies out of the iPhone 5.

    It could be as simple as the new stuff just didn't all fit in the case - the iPhone 5 is the thinnest and lightest version yet, after all.

    Maybe the technology just doesn't work right yet.

    But maybe, just maybe, Apple decided to hold a few plum features out of the iPhone 5 because it's mulling a major change to its iPhone business.

    What if Apple has decided to modify its upgrade cycle to two iPhones a year instead of just one?

    In that case, holding out a few juicy features for a late April-early May upgrade is strategic genius.

    To continue reading, please click here...
  • Could QE3 Really Do Less for the Economy Than the iPhone 5? Investors are eagerly waiting to hear if U.S. Federal Reserve Chairman Ben Bernanke will announce QE3 this week. Bernanke speaks Thursday at the conclusion of the two-day Federal Open Market Committee (FOMC) meeting and many expect him to announce some form of stimulus to revive the struggling U.S. economy.

    But there's another huge event scheduled this week, one that could provide a tool other than printing money for boosting U.S. gross domestic product (GDP).

    Believe it or not, analysts at JPMorgan Chase & Co. (NSYE: JPM) estimate that the Apple iPhone 5, expected to be unveiled tomorrow (Wednesday) afternoon and on sale by the end of this month, will raise GDP by 0.5% in the fourth quarter of this year.

    Money Morning Chief Investment Strategist Keith Fitz-Gerald appeared on Fox Business' "Varney & Co." program Tuesday morning to discuss the possibility of this iPhone effect and what it implies.

  • The Future Belongs to Apple's iPad The Apple iPad is more than just a great tablet; it's the single most important computing device released in more than 25 years.

    In fact, you'd have to go back to the introduction in 1984 of the Macintosh personal computer to find a machine as game-changing as this one.

    Of course, back then, the Mac grabbed only a small share of the huge PC market. But what it did do was establish Apple Inc. (NASDAQ:AAPL) as the sector's clear technical leader. It also gave birth to desktop publishing.

    This time around, however, Apple has turned the tables on its rivals in two ways...

    • First, it came up with a breakthrough approach and the ideal screen size. At nearly 10 inches diagonal - very close to the size of a piece of paper - this format feels natural to most users.
    • Second, it's a runaway success, boasting 70% of the market share.
    That leaves tech investors like us with two choices: Learn what this all means, or get left in the dust.

    You see, the PC industry is going into a long decline. It's already started. Ditto for newspapers, magazines, music distribution, and lots of other physical products that will get transformed into software.

    So says Michael Saylor, author of the hot new book "The Mobile Wave: How Mobile Intelligence Will Change Everything." As I told you yesterday, I tracked Saylor down to talk about how mobile computing fit into the Era of Radical Change. (You can read the first of my three-part series here.)

    His is hardly an academic view. See, Saylor also serves as the CEO of MicroStrategy Inc. (NASDAQ:MSTR), a leader in business intelligence.

    He believes five billion people will use iPads or a comparable device within a decade. That's roughly 75% of the population of Earth. No doubt, he admitted to me, that's a bold prediction. He added this:

    "It's a prediction upon which you can make a lot of money if you're an investor. Because if I'm right, then you will have beaten the crowds to that conclusion. And the reason I believe that is - we've reached an inflection point, where it's now cheaper to learn to read on a tablet than it is to learn to read on paper. And I think that's a very, very meaningful thing."
    Naturally, I wanted to know just what investors need to do to make money off this trend, so I could share the information with you.

    Saylor answered by sharing four key facts every investor needs to know about this market-dominating device.

    Here they are...

    To continue reading, please click here...

  • 5 Reasons Apple (Nasdaq: AAPL) Stock Hit a New All-Time High Just when it looked like the Apple Inc. (Nasdaq: AAPL) success story had taken a detour, Apple stock suddenly hits a new all-time high.

    AAPL shot past its previous intraday high record of $644 by reaching $648.19 during Friday's session. The close of $648.11 easily broke the $636.23 record closing price set on April 9.

    Today (Monday) Apple stock is up more than 1% in early trading, reaching an intraday high of $656.35.

    That's hardly what many investors expected after Apple reported on July 24 that it missed on its June quarter earnings and offered weak guidance for the current quarter.

    After that Apple stock dipped into the $570 range several times before quietly starting its climb back to its previous high.

    Since those lows of late July, AAPL has soared 12% -- more than twice the rise of the Standard & Poor's 500 index and almost triple the performance of the Dow Jones Industrial Average.

    How can this be? Why are investors so high on a company that hasn't really done anything spectacular lately?

  • Will Apple Buy Facebook? No, But It'll be More than a Friend It's a question that was getting asked as far back as three years ago, and seems to pop up again every time the Facebook stock price hits another new low: Will Apple buy Facebook?

    Some tech pundits think that because Apple (Nasdaq: AAPL) has so much cash -- $117 billion as of the June quarter - and lacks a presence in social media, buying Facebook (Nasdaq: FB) just makes sense.

    Those with more level heads think such a move would be a spectacularly bad idea -- and extremely unlikely.

    "I can see Microsoft making a stupid decision like this but not Apple - MSFT has a history of overpaying for questionable assets, being late to the game and having lost what truly innovative mojo they had under [CEO Steve] Ballmer's watch," said Money Morning Chief Investment Strategist Keith Fitz-Gerald.

    "I think Apple knows that the Facebook model is kaput and that it's not profitable - very similar to Google in that regard, which has held off from really rolling out Google+," Fitz-Gerald added."Shareholders would revolt...and so would the institutional money."

    But Apple Chief Executive Officer Tim Cook has strongly hinted at a cozier Apple-Facebook relationship.

    Calling Facebook a "great company" at the D10 conference in May, Cook said, "We have great respect for them. I think we can do more with them. Just stay tuned on this one."

    Why Apple (Nasdaq: AAPL) Will Not Buy FB

    Facebook's shaky business model isn't the only reason Apple would shy away from buying the social media giant.

    To continue reading, please click here...

  • What the iCrime Wave Says About Apple (Nasdaq: AAPL) the office.

    Instead they came from a trip to the mall.

    As always, Lynch was interested in what people were buying there.

    However, according to a recent article in The Wall Street Journal by Rolfe Winkler there's a new twist to this theory: these days it also pays to keep an eye not on what consumers are buying, but what criminals are stealing.

    As Winkler claims we're suddenly in the grips of an "iCrime Wave". Not surprisingly, the products mentioned are those from Apple Inc. (Nasdaq: AAPL).

    What's also interesting is what's not mentioned.

    There are no crimes associated with Samsung, the world's largest mobile phone company who partners with Google Inc. (Nasdaq: GOOG) in the Galaxy Nexus.

    There is no report of the criminal element targeting the Blackberry from Research-in-Motion Ltd. (Nasdaq: RIMM), even though it was the first smartphone.

    And no Lumias are certainly mentioned from the partnership of Nokia Corp. (NYSE: NOK) and Microsoft Corp. (Nasdaq: MSFT).

    As Israel Ganot, the founder of Gazelle, an electronics recycler, notes, "There is insatiable demand for iPhones outside the U.S., mostly in emerging markets."

    That is certainly the case in China, where more than 20 fake Apple stores have been busted.

    Meanwhile, there no reports of stores anywhere that traffic in fake Research-in-Motion or Nokia products.

    To continue reading, please click here...
  • Apple Earnings Miss Points to Slowing Growth Now that the Apple earnings report missed missed Wall Street expectations for the second time in a year, it has some questioning whether the company is finally coming back to earth.

    Revenue for Apple Inc.'s (Nasdaq: AAPL) third quarter was $35.2 billion, missing the consensus of $37.1 billion and only showing year-over-year growth of 23.2%. That growth rate was far below the 82% in reported for Q3 2011.

    Profit growth slowed as well. Apple earned just $9.32 per share in the June quarter compared to analyst expectations of $10.38. That put Apple's bottom-line growth at 27.5% year over year, little more than a quarter of last year's eye-popping 125%.

    Disappointed investors sent AAPL down 5% in after-hours trading.

    The Apple earnings miss was driven mostly by lower iPhone sales of 26 million, while analysts had expected 29 million, although Mac sales also were short of expectations.

    Several Wall Street analysts had lowered their expectations for iPhone sales in recent weeks, but Apple even missed those reduced numbers.

    The bleak news carried over to gross margin as well, which came in at 42.8%, short of the consensus number of 44%.

    The only positives were the iPad and iPod. Sales of the iPad were 17 million, beating the consensus of about 15 million. Sales of the iPod, which have been slowing for years, were actually up 10% to 6.8 million.

    But it was the bad news that dominated this Apple earnings report.

    To continue reading, please click here...
  • Apple Profits Will Prove Analysts Wrong Again Recently many professional analysts have scrambled to lower their estimates of Apple profits and revenue for the third quarter, as their earnings report is due out after the markets close on Tuesday.

    As usual, those analysts will be wrong.

    The Wall Street consensus for Apple Inc.'s (Nasdaq: AAPL) June quarter is for earnings per share of $10.38 on revenue of $37.34 billion.

    But Apple has beaten the expectations of the "pros" 25 out of the past 26 quarters, and usually by an embarrassingly large margin. Back in April FactSet Research reported that over the previous 20 quarters, Apple has beaten Wall Street's consensus by an average of 22%.

    A miss by that margin for the June quarter would put Apple's EPS at a lofty $12.66.

    Philip Elmer-Dewitt, who writes the Apple 2.0 blog for Fortune, has been documenting this phenomenon for years.

    Each quarter he tracks the predictions of dozens of analysts, both pro and independent. After Apple announces Elmer-Dewitt produces a scorecard to show how each fared. The independents, he's found, hit the mark far more often than the pros.

    His current poll of 66 AAPL analysts includes 32 pros and 34 independents. For the June quarter, the average estimate for the pros is earnings per share of $10.32 on revenue of $37.3 billion. The indies, however, see EPS of $12.28 on revenue of $41.43 billion.

    Meanwhile, gives an EPS of $11.63.

    Where Wall Street often goes wrong is in severely underestimating Apple's product sales.

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