Buy Apple/AAPL Now?

A friend and I were talking on the phone yesterday about Apple/AAPL and whether he should buy it now. I talked about my owning it at 14 and selling it the day before it jumped to 40 on iPod sales news. I bought it again at 90 and it went to 180. I sold half at 180 and the other half in the 145 range. Now it's sitting at 180+ and I'm thinking I left some money on the table, but I also have been sleeping better. Once a stock feels like the speculators have moved in I tend to sell it and stay away from it and AAPL seems like the speculators have moved in. I love Apple and think they are hitting on all cylindars (which is great), but I also like things that go up at a nice steady pace. Once they go off the chart there really isn't a lot to back up and look at from a historical perspective.

One thing you can look at is P/E ration. I use Yahoo Finance to look at these. Anything in the 15-20 range is reasonable. How do I know this? I don't, it is just something I picked up somewhere. I barely even know what the P/E (Price to Earnings) is or how it is calculated so if you are reading this, eat some salt.

Take a look at the P/E for AAPL. (Today 38.18. Estimate in 1 year 29.20).
Take a look at the P/E for MOT. (Today 22.65. Estimate in 1 year 21.44).
Take a look at the P/E for NOK. (Today 8.61. Estimate in 1 year 9.25).
Take a look at the P/E for IBM. (Today 16.38. Estimate in 1 year 13.09).

Compared to the two cell phone manufactures MOT/NOK, Apple is very high. MOT is only high because they are doing so poorly financially that it looks like it should be going down even farther...? The NOK P/E ration seems really low, but this is the nature of the cell phone industry, no one is really making much money.

Compared Apple to IBM from the computer side and you see the P/E is over double IBMs. To me, all these signs point to an over inflated stock and that speculators are buying for no solid reason except that they know Apple is hitting on all cylindars. Apple is a great company that I love, but to me it is even more dangerous because even though they are making a really cool phone, they are getting into a market that has some big giagantic companies who are all struggling to make a profit. I'm staying away, but I don't see any reason why it won't got to 220 soon.

There must be something wrong..?

My account keeps going up, like crazy for the past two weeks. As of today I'm up 11.2% for the year and just two weeks ago I was up 2% and two weeks before that I was -2%. No really, this is how it usually works. My account takes huge swings and as long as more of them are up than down, the long term aspects are positive. Also, you have to be willing to take some big downs (like my holdings in AMD, DRIV and GE) and even miss some opportunities (like selling Apple/APPL) too early.

For now I'm happy with my holdings and I'm sticking with them. DRIV and AMD seem to be returning. GE is a mess, but at least it has stableized. If it has more credit issues I'm selling it and I still have a stop on it a few points below where it sits now.

You have to believe in the companies you hold. Especially the leadership. Until six months ago I had been holding Motorola at around 18. It is a stock that I watch. I liked it even more because the CEO was Ed Zander who was an exec at Sun Microsystems when I was there. I had met him briefly a few times on a sales call and at some training/sales meetings. I really liked the way he worked so when he took the CEO job at Motorola I bought in. The stock didn't change much and when I learned he had left (that Icahn guy causes a lot more problems than he solves) I sold the stock. I didn't actually sell it because Ed Zander left, I sold it because there was a leadership hole and organizations without good leaders don't do well (especially when Icahn is stiring the pot). Now it's sitting at 10 (Icahn must really like to lose money..?) and I don't have much interest in it. Mostly because I don't watch it as closely and I don't understand what their strategy is going to be. You can't say enough about a hot performing company, or a company with a great leader. Both are signs of a stock to hold and most of my current holdings fit that bill.

Also I should have sold all my Sun Microsystems (JAVA) when Jonathan Schwartz became CEO since I never liked his strategy with Java (turn it into the biggest piece of bloatware imaginable because we have to be all things to all people) and from what I could see he was devisive with people. I could have told you (and should have told myself) that a devisive leader was the last thing Sun needed. The stock did a reverse split (annoying), renamed itself to JAVA (very annoying) and is now continuing to spiral down to the price it was before the reverse split (he needs to be held accountable). Sun needs a new leader and I'm only holding a very small amount in my account so I can watch it.

Anyway, here's to good leaders and my account being up 11.2% for the year. I expect it will probably drop back down to 5% before it goes up more, but for now I'm pretty happy. :-)