I normally don’t blog it up, but 140 characters is just too short.

RE: Apple’s Earnings Growth

Wall St type thinking is something to stay away from. It will poison your mind with “this is what the books say”. Use what is real and what we know to be fact. When people use a comp on Apple for, ‘what should happen in the future’ — stop listening right there. There is no comp for Apple, it doesn’t exist.

Earnings Need to Keep Growing, Myth

Apple has no comp therefore perpetual growth need not apply. In a normal stock, yes, the company would need to keep growing gross revenue 10% Y/Y,  just to keep its EPS flat. Apple is not normal. It has software margins. Apple also dumps $13B cash in its coffers per qtr.

So, if we take a 0% growth rate from right this second (AAPL’s weakest qtr) we get $52B added to the B-Sheet per year or $260B in 5 years. Oh, but we need to add in the $110B current. This equals $370B in cash. Now, suppose a company that had an operating cash flow of $72B per year accompanied a stock where 50% of its value: Was in cash. This company would have a market cap of $740B on 0% growth from 5 years past.

Since we used the cash from 0% growth, it was derived from somewhere right? Oh, earnings. Apple’s ttm EPS is $41.01. If $41.01 ttm EPS can create a market cap of $740B in 5 years; what does earnings growth have to do with stock growth? After all, the company and the stock are two different things — right bears?

Since there has never been an Apple, Wall St isn’t prepared for a perpetual $41.01 EPS, yet the cash keeps climbing, $300B, $500B, $700B etc. If cash piles to the moon, what does growth have to do with anything? If Apple has $400B cash and $20 ttm EPS, you really think P/E matters? All about that cash flow.

Apple going from 100% growth to 0% on 5% global PC share, 10% cell phone and a tablet share that is in zygote phase is ridiculous.

In other words, have Wall St show me another company that has 90% FY/FY growth that went to 0% the next? There is no legitimate business which has. Why would it happen to Apple? One reason, Fabrication….

I knew the facts in 2007 at $202.96 and I knew the facts at $78.20 in 2009. Never sold a share. I knew what was real and what was fabricated. I’ll attach a few ASYMCO graphs to bring home the point but, I leave you with,

Have confidence in yourself, do whats right, let your point prove you.

Asymco - Link 1

Asymco – Link 2

Travis Lewis

AAPLPAIN.COM

(Didn’t proof read, just let go)

Sorry, had a hard time expressing this one. Be much easier in a classroom setting. Also, I didn’t mention but the same applies for buying on the way up. When I said you would have bot back the 50 shares at $580, you could have done a full reversal and bot 150 shares, leaving you long 100. You would have held thru $600 the 1st time and sold when AAPL was coming back down thru it. (from $622 to $599.99)

My main point is; do not fear weakness. Take advantage of it, as you know the truth.

Sorry I speak so fast. I have so much to say that 10 minutes goes by in the blink of an eye so I speed up the tempo. I know it’s not the best way to present but…

3 Min in or so, I meant 250K shares, not 2.5M.

I wanted to give a visual of what happens underneath Apple’s surface. This data is specific to 02/10/12 weekly opex. The two area graphs represent the highest volume, one for each call and put. The two line graphs represent the actual OI after the close. This is actually what was left on expiry or going into Saturday. You will not find this data elsewhere.

I want to concentrate on the highest volume strikes for the day. This happens to be ~46K contracts on the $490 puts and ~70K contracts on the $495 calls. I do not want to get into delta/gamma hedging, but concentrate on what happens when options close. When a call closes it causes selling pressure. When a put closes it causes buying pressure. In the above graph I want to display a visual. Picture the call ‘pyramid’ collapsing as calls close down. This sends the stock straight down hill. Now, picture the put ‘pyramid’ collapsing. This sends the stock higher. Both forces repeal AAPL, squeezing it harder and harder until — the closing bell rings. You can also think of these like two opposing magnets. AAPL is the ferrous metal forced to the center of these two magnets.

Apple’s trading range was $488.55 – $497.62 with a closing price of $493.42. This happened to be right in the middle of the highest put and call volume. While all this is short-term trading info, I hope it helps shed some light if you are ever scratching your head on AAPL’s trading patterns.

I have a little glitch in my recording system that causes a split second to not get recorded. It’s at random. So thats why you may hear it get cut off. — The glitch happened at 3:50 area. What got cut off was saying “thats what we saw this week was that frame 5 run” (something like that)

I do these videos unscripted, so forgive me if they go astray. I forgot to mention. Fridays volume was only 6M shares. You can bet 80% of that volume was related to option hedges coming off and going on as people open and closed positions.

Just noticed. That chart I showed, there was no Monday trading, that 1st day was a Friday. Awe, what are you going to do. Same premise applies :o)

I said earnings will be after opex. CORRECTION: I meant to say; “earnings will be BEFORE opex. Earnings will more than likely be on 01/17/12. If ER is after opex, I will reevaluate.