Tuesday, June 24, 2008

Bookkeeping: Buying some Apple (AAPL) Ahead of Research in Motion (RIMM) Earnings

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Keep in mind folks, we are down about 7% straight in 3 weeks and as I outlined this weekend tomorrow is setting up for a potential positive day as a lot of "safer" blue chip type of multinationals report... along with Uncle Ben. Despite constant mismanagement and poor predictions (i.e. as the economy weakens, inflation will dissipate) people always look to authority figures in times of unrest. So Uncle Ben is the calming figure - even though he will most likely do nothing tomorrow, traders will use any sliver of data point to make a case to buy. In fact, when these 4 companies report tomorrow, you can see CNBC chiming in "what is all the fuss about, things are clearly going well" - everyone has absolute short term memory and FedEx, UPS, Dow Chemical will be forgotten in a snap.

Further on Wednesday we have a slew of earnings reports from some of the best companies out there so we could have a good psychological day. Monsanto (MON) on the agriculture side, Nike (NKE) on the global brand side, Oracle (ORCL) on the big cap tech side, and Research in Motion (RIMM) on the must have gadget side. So it is quite easy to get overly negative here, but nothing in a straight line (even if you are a full blown bear) - we should expect head fakes along the way, causing pain to whatever side of the tape you are.

Nothing straight down, or up. Unless you were in the thicket in January 2008 - when in fact it was straight down. Aside from Oracle I could see the other 3 companies really having some major positives so that could set the mood brighter tomorrow and Thursday AM. Unfortunately it's always impossible to gauge the market reaction to Uncle Ben and crew so thats an unknowable variable.

With that in mind, I've cut some short exposure into this morning's tape and also am adding some Apple (AAPL) with halo effect via good results in Research in Motion (RIMM) in mind. The stock is trading around its 50 day moving average so it's pulled back to a first support level, and it's a solid place to begin to rebuild. Much like any purchase at this point, I am going slow but for now Apple is back up to a 1.4% stake. I would still like to ultimately add Apple in larger scale in the $160s (or $150s), but $174/$175 is a decent beginning. I do still believe it will go lower however over time - this is a classic double top forming - and there is a nice gap in the chart around $156

Again I've been struggling to find new technology names that actually have secular growth over 15% annualized, so my first preference is simply to add to the few names we already have in the portfolio, but I wanted to see lower prices, so we are starting to get some of that now. When money does come out of commodities (and for all you doubters - nothing straight up - it will happen at some point) it will flow into other areas so we want exposure there too.

Once we get through these earnings reports, will revisit the mood of the market Thursday around noon. Or if good reports are met with selling that would be another strike against this market. Between now and mid day Thursday the mood will be news dependent, and how people react to said news. Volatility ahead....

Long Apple, Research in Motion in fund; no personal position


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