The recent sell-off we've seen in Apple Inc. (Nasdaq: AAPL) shares came as a real stunner to Wall Street.
But Strike Force Editor Keith Fitz-Gerald saw the sell-off coming.
In fact, he predicted it.
Back on March 27, Keith wrote a lead story for Money Morning in which he articulated seven very clear reasons that investors should consider shorting Apple's stock.
And that was a couple of weeks after he detailed a "put" option strategy – in essence, a "short" trade – that resulted in a 47% profit (in just two days, no less) for the subscribers of his Strike Force trading service who followed his recommendation (a short-term reversal delivered those gains).
I wanted to know what tipped him off that a reversal was coming – as well as what he was predicting for Apple's shares going forward.
"BP, it was clear to me that this kind of reversal was coming – and sooner rather than later," Keith said during a private briefing late last week. "The shares had soared 75% in just five months – one analyst actually described the performance as "euphoric.' Suddenly, we're seeing all these mainstream-news-media stories explaining why Apple shares are going straight to $1,000. But I know from my own experience as a professional trader that even the shares of the best companies on earth don't go straight up. I happened to time it perfectly and help Strike Force subscribers take advantage of the reversal I just knew was in the offing."
Key Questions for Apple Stock
The way we see it, the Apple stock sell-off raises these three key questions for investors:
- No. 1: What's going to happen to Apple shares in the near-term?
- No. 2: If the stock is headed for a volatile stretch, is there any way to profit until the smoke clears?
- No. 3: What's the long-term outlook for Apple – both the company and the stock?
Having worked with him for five years, I've seen Keith make gutsy calls like this – and have them pay off big – time and time again. Since I knew you'd be as interested in his answers as I was, we wanted to share them with you.
Here's what Keith had to say.
First and foremost (Question No. 1), Keith said he expects the near-term volatility in Apple's stock to continue.
That doesn't mean you can't make money right now (the issue I raised in Question No. 2). Keith said he's watching for new opportunities to "short" the stock and generate additional profits for Strike Force subscribers.
"Everyone's been focusing on the drop in the share price, and are worried that carriers may cut subsidies for both iPhone and iPad users – which would naturally erode overall corporate profits," Keith told me. "But the bigger story is going to be played out when Apple releases its earnings [tomorrow]. I think Apple is going to miss on key sales figures related to the iPad. If they do, it's likely to spark multiple downgrades in the weeks ahead, leading to a downside "snowball effect' as the stock corrects further" – and allowing the "shorts" to profit.
Don't think for a minute that the volatile stretch Keith is expecting will finish his interest in Apple's shares: He says the long-term outlook for this company (Question No. 3) is excellent. That's why – if the stock drops far enough, and seems to find support – Keith will look for an opportunity to turn around and become a buyer.
"If I get a sense that there's a point we can step into the fray, we'll be buying," Keith told me. "Even as we speak, institutional traders are looking to short the stock and pound the price down even more. Here's the funny thing about that: Their goal is the same as ours – to get in at a much lower price before riding the stock up to $1,000 a share. I expect that this process could take a quarter or two – but when the opportunity presents itself, you can bet that I'll act quickly."
When Keith senses that it's time to buy Apple again, it's my guess he'll nail that one, too.
Related Articles and News:
- Money Morning:
Apple Inc. (Nasdaq:AAPL): When to Buy the World's Hottest Stock
- Money Morning:
The Three Innovations That Will Make Apple Inc. (Nasdaq: AAPL) the First $1 Trillion Company
- Money Morning:
Fuzzy Math, Greater Fools and the Facebook IPO
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About the Author
Before he moved into the investment-research business in 2005, William (Bill) Patalon III spent 22 years as an award-winning financial reporter, columnist, and editor. Today he is the Executive Editor and Senior Research Analyst for Money Morning. With his latest project, Private Briefing, Bill takes you "behind the scenes" of his established investment news website for a closer look at the action. Members get all the expert analysis and exclusive scoops he can't publish... and some of the most valuable picks that turn up in Bill's closed-door sessions with editors and experts.