Gundlach: Long AAPL, Short CMG; Fannie, Freddie Speculative

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Gundlach: Long AAPL, Short CMG; Fannie, Freddie Speculative

The stock seems too cheap at these levels, says, Jeffrey Gundlach, Doubleline Capital CEO, but he doesn’t see Apple going past $700. Also, Gundlach explains why he wants to short Chipotle if the stock goes lower from here.

Gundlach video and computer transcript below


voted best investment services company. Óó we are back with jeffrey gundlach who now own the the stocks? that’s correct. have you added to it in the past few weeks? no, but we added — we first bought at 4.05 and averaged higher. i think apple seems to be forming a base to me. it certainly moved down in a way that was frustrating for investors that were long and seems to have a hard time rallying above 4.50 but i think it’s going to. it’s one of these stocks that was so revered, therefore overowned back in the summer of last year and then it becomes sorts of this reviled sort of stock, which i don’t think is right either. all of the fundamentals that people talk about now as being a reason why apple may not have the growth they had in the past. all of the fundamentals were crystal clear a year ago. it’s an amazing study in market psychology, how you can go from some believed and revered to now very highly questioned. i think apple goes to 500 bucks anyway. it seems to me to be too cheap versus a lot of other stocks given their cash flow engine that they have. i’m not so sure we’re ever ever going to see 700 again in apple, ats least in the context of markets where they are today. it seems like 500 should be a fairly easy place for the stock to go to after collapsing from 705 in the high 300s. also, it’s basing out in a way that is fairly encouraging. i also think that apple is a stock — it’s weird. it seems to behe anti-stock market. seems to go up on days when the s&p goes down. very good point. and down on days when the s&p 500 goes up. it’s a pretty darn good diversifier and it seems to help to move in a way that isn’t just all one market type of stock portfolio. it’s a nice ininclusion at the levels it is today given how low it is when they strip out the cash and the fact they are working on giving income to investors. which is a big deal. one of the things that has driven markets this year for sure until very recently, has been people looking for income sources. that’s not going to change. now people are pausing because some of the things that are yieldy have been falling a little bit in price. utilities and other things, bond-like stocks. we asked the question on the desk all the time, is the quote/unquote makeup of the rally about to change for the very reasons you’re suggesting now? yeah, i think though that people are going to perpetually given demographics and zero interest rate policy are going to return to a need for income. i really think that the movement down in income payers is a reasonably good buying opportunity. in japan, a lot of things got fairly expensive. you look at the move of my favorite stock, one example of something that was an income payer was campbell’s soup. a truly recession proof type of company, probably does better, more sales during recession. it was up so much for a company like that but investors should, two months ago, everyone was saying, i’ve got to buy dividend paying stocks that are safe and recession proof. now they are cheaper. it seems to me utilities and certain bonds, various income paying stocks, there’s no reason to abandon the these sis. i think the reason for owning them remains intact for quite some time to come. let me ask you, are you still short chipotle? the funny thing about chipotle, the perfect spot to short it at was at 380 bucks and it almost got there. got to 379 and change. but the theme of chipotle going down, the entry point is up for debate. i think it’s almost certain t go down. the pe seems amazingly high to me. so, wait, the market took to be you actually putting on a short position around or near the conference, you never actually got short those shares because it didn’t hit the price you would have done it? that’s correct. i had the trade order in at 380 and somebody got in front of me and it never got there. e concept of it going down, i think is pretty strong. i’m a huge believer in trade location, in particular when it comes to shorting. trade location is a big deal and chotle is overvalued. it’s a weird straight line side ways for the last six or serve weeks. if it gets to 380, you’re supposed to short it. i like their products. i know their stores are crowded but they have an aux lot of them. the fact you’re pushing out product about as fast as you can, with a pe of 40, somehow doesn’t go together with me. i think a good solid pe of 25 might make sense for chipotle. 40, i think the stock has to move lower to adjust the price. jeff, want to get one of the traders involved. steven weiss has a point, maybe a disagreement on what took place on friday and what we’re seeing now. jeff, i’m the one that brought up the rebalancing the balance funds. i’m bullish on equities and not as bullish as you are on bonds. right. if equities continue to move higher and bonds continue to little bit erode, you have the natural imbalance and these funds do set perimeters for their exposure, why won’t that be a continued issue in terms of volatility? rebalancing happens on a monthly basis. i think your point has some validity to it, that you had a big move down in bonds, especially long-term government bonds and a pretty darn good rally in stocks. people that rebalance on that, not surprisingly may have bought bonds and sold stocks. the way the market acted on friday, i don’t think that’s what drove it. it should have happened earlier in the day and shouldn’t have had these extreme moves of stocks being up early in the day and bonds being down. people don’t wait until one hour before the close, at least i don’t think so. i think the movement in bonds has a certain fear factor to it that started to take stocks down in addition to rebalancing, but i don’t expect you’re going to see as i said earlier, i certainly hope you don’t see the rise in bond yields in the near few weeks you saw in the last few weeks because i don’t think the markets can handle it. if you don’t see that interest rate move, the rebalancing that comes at the end of june will be far less. so i’m not really terribly concerned about that. quickly, because we’re running out of time. fannie and freddie, you own either of those? we’ve seen big hedge fund guys get involved in those, particularly speculative plays. i’m not involved in that simply because i’m not a ulator at all. we have a culture of cowardess, we only like things we feel we can analyze into the ground. i know there’s a case for some of that junior stuff with fannie mae but i don’t play around in stuff that has that sort of speculative nature to it. we mentioned your appearing here exclusively ahead of your web cast later this afternoon. it is 4:15 eastern time, we’re putting it up on the screen right now. we want to tell folks, you have the double line floating rate fund which is now going to be open to the public and that’s new. we’re going to start what — we’ve been using that as diversified funds for month. it’s been doing well. there’s no interest rate risk basically, which is an interesting thing given how people feel — some people feel about interest rates. mostly bank debt which is one of my favorite asset classes. and we are opening that up to the public july 1st. bank debt is hard for people to buy. you can’t really do it as an individual but it yields almost the same as fixed rate publicly traded high yield bonds, which is interesting given the fact it’s senior in the capital structure and doesn’t have interest rate risk because it would float higher if rates were being engineered higher for whatever reason. it was an interesting way of diversifying people’s assets so i’m a fan. we appreciate you coming on today. 4:15 eastern time this afternoon. we’ll follow it live here at cnbc as well. jeff, thanks.

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