A Paradigm Shift for Apple

02/11/2013 10:15 am EST

Focus: STOCKS

Jim Farrish

Founder and CIO, Jim's Notes

There are a couple of easy reasons why Apple, while still a solid stock, is not rushing back to record highs anytime soon, says Jim Farrish.

I’m talking with Jim Farrish today. Hi Jim and thanks for being here.

It’s good to be here.

You know, I’ve been at this show for many, many years. In the last few years, I have talked a lot about Apple, and Apple has just been such a great discovery. It was up to $700 and it has gone down to $450 or so, and I’m still hearing a lot of people say it’s going right back up, but you don’t necessarily think that.

I think it could go back up. I don’t think it’s going back to $700 anytime soon. The challenge that we have got with Apple is product.

Steve Jobs founded the company on the fact that he said the consumer doesn’t know what they want until you show it to them. Well, if you look at their track record over the last year, all they have created is "me too" products. They have created a mini iPad.

They haven’t come out with a new product—even with the iPhone 5; they improved the camera, they improved the bandwidth. That’s not a new product. Now the announcement just recently is they are going to come out with three new iPhones that are cheaper. Innovation is what drives Apple and what has driven Apple over time, and they haven’t been doing it.

So do you think with the new CEO that that is never going to be Jobs' Apple again?

Well, I don’t like to talk bad about Tim Cook because I think he was put in a bad situation. If you think about it, if you were Bill Walsh who coached the 49ers to three Super Bowls, I wouldn’t want to be the coach to follow because you are never going to measure up, and that is following Jobs.

I think it is a well-run company. They have great revenue, their earnings are very good, and they’re trading at ten times earnings. I understand fundamentally the stock is cheap.

I think it’s a trading stock now, I don’t think you really buy Apple and hold it. We had set our target at $660, so I didn’t make that up recently. We felt it was going to fall to $425 and it did fall down in that level, and it has now bounced back up around $450. I think maybe it could get to $500, but I think it is going to stay in that range—$425, $500, maybe $525. But it is going to become a trading stock.

I wouldn’t necessarily short it?

I think the short is over. I think the short was back in the $600 to $550 range. To be short, Apple right now is probably dangerous. I think a lot of the short pressures have come out of the stock, a lot of covering has happened.

But I think it is more of a trading stock for you to look at opportunities, like $425 was an opportunity to buy the bounce up around $450. If it can get through this resistance though, maybe to $500, then maybe I would short it back to $425. But I don’t like to short stocks in trading range; I would rather buy the long side of the stock at that point.

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