Brokers regularly need to make snap decisions on holding, buying, or selling Apple stock. There is no time to interview management, consult stock analysts, or peruse lengthy research reports when making a stock transaction for Apple. However, a glance using critical information can lead to better decisions under pressure. Apple typically has strong stock but does have certain products that flop upon launch. When the company presents a press release regarding the quarterly report, skip past the filled and search for the following key facts:
Increase in Margins
A company’s margins either improve or deteriorate depending on company management. If the sales are increasing but costs are rising at a faster rate, then there is a problem. This is not necessarily bad news as a company could be launching a new product, entering a new business, or expanding its footprint. For instance, Amazon enraged investors several years ago by investing in warehouses across the United States. Those infrastructure purchases eventually paid off dramatically.
Looking past the press release, also consider macro trends that could impact the stock. Macro trends are defined as powerful asset return factors because they impact the risk-neutral valuations and risk aversion of securities simultaneously. These trends include higher taxes, consumer buying behavior, and rising interest rates, all of which could impact the success of the stock. Additional external factors like an industry-wide change could influence the company.
It is impossible to predict whether a new product will win in the marketplace. Therefore, it is a tremendous mistake to overlook company stocks that launch them. New products gain a higher focus from consumers and investors than existing products. This shifts the share price higher in the immediate future and the company has likely spent a tremendous amount of money on promotions and R&D to make money.
For instance, the launch of the Apple iPod in 2001 initially caused skepticism within the investment community that Apple could deliver relevant revenues. However, it turned out that the device drove Apple’s growth throughout the entire decade. In some cases, new products end up flopping in the market which can cause share prices to decrease.
Stock Buyback Programs
When a company utilizes a stock buyback program to purchase its stock with cash, that means management believes the stock is undervalued. Repurchasing programs are almost always mentioned in company press releases. However, management may have additional motives like reducing the total share count within the public domain to boost earnings or improve financial ratios, making the company more attractive to analysts. It could also be a public relations ploy for investors to determine the stock is worth more money because there is less of it.
Share repurchase programs are typically a sign of better times for the company. Generally, you want to see the number of outstanding shares remaining the same or falling because of the repurchase program. This means future earnings are spanning fewer shares increasing earnings per share. As the outstanding shares increase, earnings are divided across a larger group of investors diluting them and decreasing potential profit.
Reviewing the stock chart for the last several years will provide you with a wealth of information. Are you finding seasonal variations in the price? You may uncover that there are regularly lower or higher trades in specific seasons. Furthermore, look at the trend the stock is trading in:
- Has the volume increased or decreased? A decreased volume indicates less interest in the shares which could decrease the price. Increases show favorability for the company if the fundamentals are solid.
- Is it trading higher or lower than its 200-day and 50-day moving averages?
By necessity, investors and their hired brokers need to analyze companies quickly and make fast decisions to holding, buying, or selling Apple stock. Determining the key performance indicators helps them avoid making a rash decision thus improving the chance of immediate or long-term profits.