Kass: Upset the Apple Cart
What should investors learn from Apple's abrupt fall from grace over the past four months?
To me, Apple's fall speaks volumes regarding the risks of lemming-like behavior on Wall Street (especially at inflection points of popularity) as well as having more Apple-specific ramifications regarding the company's future profit growth rate.
The Lesson of the Markets
It is a given that the crowd usually outsmarts the remnants -- that the contrarian (regardless of the intensity and integrity of analysis) faces an uphill battle because inflection points in markets, economic cycles and of opinion are more infrequent than frequent, more atypical than typical. The contrarian's arguments are typically pushed back (and even ridiculed) by consensus players and the media, most of whom have a vested interest in up not down.
The most important takeaway is that unanimity of opinion often illuminates a dangerous path. When something seems too good to be true, it usually is. This observation might very well apply to the current almost universal bullishness on the part of most investors in which the line of demarcation between progress and fantasy is blurred.
The Lesson of Apple
As to Apple, it remains my contention (as has been the case since late September) that the company's secular earnings growth rate continues to be overstated by Wall Street analysts and investors and that a confluence of factors led to a peak in optimistic sentiment regarding Apple's share price four months ago. That optimism led to an unprecedented flow of funds into Apple's shares, the establishment of unrealistic company share price targets and unattainable profit projections.