I immediately look at the top five holdings. If Apple is in the top three, you can more or less
guarantee that if you strip out Apple's contribution, the results were mediocre to bad.
Risks to Consider:
I'm not ashamed to admit that I am bearish on Apple (see the article I wrote in June of last year). At the same time, I was dead wrong. Shares nearly doubled since that article was published.
Apple is a classic outlier company even without Steve Jobs. It could very easily reinvent the wheel and the herd could take the price even further into the stratosphere. The company has been awfully quiet since the launch of its cloud-based storage product. That could be good or bad. Nevertheless, the chart looks broken to me.
Action to Take --> Apple shares are currently down around 5.5% from their recent high of $644. First-quarter earnings were a blow out. That's great, especially if you already own shares. But going forward, that only makes outperformance that much more difficult for the company. Any slight disappointment and a huge pack of lemmings will likely head for the cliff.
If your gains in the stock are substantial, then take some, if not all. If you're so attached to the stock, which typically happens to investors who have a great deal of success with one particular investment, then take out your original investment and play with the house's money. Also, you can place trailing stop-loss orders of 10% below the current price, for example. If you don't get stopped out and the price recovers, bump up your price. It's better to be safe than sorry.
-- Adam Fischbaum
Adam Fischbaum does not personally hold positions in any securities mentioned in this article. StreetAuthority LLC does not hold positions in any securities mentioned in this article.
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Author: Adam Fischbaum