Another Apple Myth Gets Debunked
As Apple (NAS: AAPL) barrels to new all-time highs this morning -- and cynics scoff at the notion that it's different this time -- the world's most valuable tech company managed to upend an interesting trend.
Earlier this month, Spencer Jakab offered up an interesting nugget of investor behavior in The Wall Street Journal's "Ahead of the Tape" column. According to Jakab, outside of the original iPhone, the average one-week performance for Apple's stock after an iPhone or iPad hits the market is a decline of 3.5%. The good news is that Apple shares have also managed to gain an average of 2.9% during the week leading up to the actual sale date.
These trends should have aided Apple traders in figuring out how to play Apple in light of the new iPad. Get in once the new tablet is announced, but cash out once it actually hits retailers.
How did that play out?
The buildup certainly lived up to and in fact exceeded the historical run. Shares of Apple gained a little more than 8% in the five trading days leading up to its March 16 debut. However, a funny thing happened after folks got their hands on the new device. Apple's stock kept moving higher. The stock went from $585.56 on the eve of the new iPad's debut. It closed at $599.34 this past Thursday -- five trading days later -- for a 2.4% gain.
If you pull up a quote this morning, you will find the stock continuing to pad its historic gains.
So what was different this time?
Well, one can argue that the trend simply didn't have enough data points. Since the original iPhone we've had four generations hit the market. There were also the first two iterations of the iPad. Can we base a trend on just six data points?
That's certainly debatable, but let's tack on this month's new iPad data. Now that we have a seventh event, the numbers do change somewhat. The 2.9% historical gain during the week ahead of an Apple release shoots up to 3.6% given the 8% pop this time around. The 3.5% decline during the trading week after the gadget is actually on the market shrinks to 2.7% after tacking on the new data. The "buy on the hype, sell on the debut" adage is still intact, but it's no longer as effective on the downside.
Why stop there? Why did Jakab back out the original iPhone? Yes, it was different. Apple unveiled the now iconic smartphone more than five months before its June 29 release in 2007. However, the stock popped 8.4% higher in its first trading week of availability. Throw that meaty morsel in and the stock's decline during the first week that an iPhone or iPad is on the market falls all the way down to 1.3%.
Is that enough of a trend to trade on? Will speculators recall the strong run last week after the new iPad was released?
The best lesson here is that it's better to just own Apple than to try to figure out when to dart in and out of the tech giant.
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