There has been much consternation regarding Apple Inc. NASDAQ:AAPL breaching the $100 level. Split adjusted that equates to the previously taboo $700 level – a price altitude that previously made traders faint. This leaves investors are wondering how high the stock can go on a fundamental level. Algorithmic traders, however, who operate on the investment thesis that news – including insider information – is often included in the stock price, have a different view.
Apple fighting to become a leader in the IoT
On a fundamental basis, Apple Inc. NASDAQ:AAPL is fighting a war to become a leader in the Internet of things – the holy grail for the next 30 to 50 years. Building and controlling the operating system that connects household appliances to smart wearable’s, smart automobiles and a myriad of devices used as the pipeline for mass communication in the future – this monumental vision – is something not often discussed in evaluating the stock of Apple.
ValueWalk has noted this battle and various hedge funds have come to the conclusion that in a four way race, being in a near dead heat for the number one spot with the uber-control machine that is Google Inc NASDAQ:GOOGL NASDAQ:GOOG isn’t that bad – and not valued into the stock price.
This might be a reason deep inside the investment thesis used by Carl Icahn, but such information is only known to the activist who recently had drinks with a CEO and then days later called for his resignation. Hard to get inside that mind.
Carl Icahn’s investment in Apple
It is unknown exactly what Carl Icahn sees in Apple’s stock, but the activist investor is currently delivering amazing performance with one hand tied behind his back: he is currently only 40 percent long, with a sizable portion of the portfolio hedged.
Icahn called investment in the stock a “no brainer.” Typically when anyone speaks of an investment as having no risk or being easy, red caution flags should come flying from investors. But we’ll give the loose talking 78 year old hedge fund legend a break.
In a recent press report, Morgan Stanley’s analyst Katy Hubberty, assumed to operate with a more reserved, compliance friendly sense of bravado when making stock recommendations, had more detailed thoughts that looked at the mid-term time horizon
“Apple shares do not price in upcoming hardware, software, and services innovation, in our view,” she was quoted as saying as she eyed a $120 in the short term. “We expect iPhone share gains and growth re-acceleration driven by larger-screen iPhone based on our AlphaWise survey and supply chain checks.”
What Hubberty didn’t say is that Apple is a master at marketing. The tension and pressure they have built surrounding product releases is masterful at generating intelligent buzz – and could move the stock price – defying the boogie man of a triple digit stock price.
iPhone 6 could boost Apple’s stock price
Probability logic suggests that the buzz around Apple – and its stock price – could move higher into the release of the company’s iPhone 6 just weeks away.
For their part the trading algorithms, ignoring the noise of news babble, appear to like the stock as well.
While some forward looking trend indicators indicate we could see some grinding action near $100, certain mid-term momentum strategies were triggered days ago. Speculation is the stock could see an occasional dip, it is looking strong on a near term basis. Algorithmic traders generally don’t have targets but will let price momentum determine their exit price – and long term algorithmic investors are likely to stay in the play for years to come unless we see a shock of unpredictable proportion appear, as it would take a deep sell-off to trigger longer term algos.