The Best of Kass
Among his posts this past week, Kass wrote about Apple's prospects in 2013, why he is temporarily abandoning his short position in Treasuries (for the time being, at least) and why he sold shares in a China ETF.
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Previewing a Surprise
Originally published on Friday, Jan. 4 at 9:23 a.m. EST.
Surprise No. 10: Despite the advance in the U.S. stock market, high-beta stocks underperform. Though counterintuitive within the framework of a new bull-market leg, the market's lowfliers (low multiple, slower growth) become market highfliers, as their P/E ratios expand.
With the exception of Apple (AAPL) , the highfliers -- Priceline (PCLN) , Baidu (BIDU) , Google (GOOG) , Amazon (AMZN) and the like -- disappoint. Apple's share price rises above $550, however, based on continued above-consensus volume growth in the iPhone and iPad. Profit forecasts for 2012 rise to $45 a share (up 60%). In the second quarter, Apple pays a $20-a-share special cash dividend, introduces a regular $1.25-a-share quarterly dividend and splits its shares 10-1. Apple becomes the AT&T (T) of a previous investing generation, a stock now owned by this generation's widows and orphans.
-- Doug Kass, "15 Surprises for 2012"
Last year I wrote that Apple would be a positive surprise in 2012, though I turned negative on the company's fundamentals and share price in late September.
This year's surprise for Apple is distinctly negative -- that is, for the first six months of the year:
Apple's share price and earnings continue to disappoint in the first half of 2013. A consistently low share price for Apple persists in the first half as earnings estimates are steadily reduced owing to lower production rates. Two important product releases lead to an improving share price for Apple in the second half.