WARREN BITES AN APPLE WITH A WORM IN IT,
So Warren takes a bite of the Apple
But there is a bit of a worm in it,
Worm, thy name is valuation,
The time to buy Apple was when it was trading at five times earnings back in early 2013.
WHY WAS IT SUCH A GREAT BARGIAN THEN????
1/ Because the hedge funds were dumping it like there was no tomorrow. Because they wanted to lock in their performance fees before the end of the financial year and they thought if they continued to hold Apple their big fat juicy performance fees would disappear. Thats what happens when you calculate fund manager performance fees on an annual basis.
2/ Apple had a pristine balance sheet with lots of cash and no debt.
But come 30 June 2013 the stock did a 180 degree turn and has never looked back!!!!!!
(with the new financial year came a positive pshycological "Frame" for the stock)
When it trades for 20 times earnings and it has jumped the shark from a performance point of view.
The stock has simply run out of runway (it was a long runway but then Apple is a big stock).