Apple: Monster Stock or Mania?






In bull markets there are two types of stocks rocketing up in value. There are monster stocks that increase in price, doubling and then doubling again. Monster stocks have real earnings, real sales increases, world changing products, technology or services. Monster stocks have reasonable fundamental valuations based on their growth potential. Monster stocks of the past were Google, Cisco, Walmart, Price Company, Hansen Naturals, Intel, Taser, and many others that changed the world and caused cash to flow into there coffers rising their share price. Monster stocks main driving force is increasing earnings and sales. They go up 10-20% in a quarter and have normal pull backs to their 50 day moving average during market corrections and find support at their 200 day moving average during bear markets. Monster stocks can run for years and years until everyone has bought into it and it is finally over owned with no one left to buy. Then their earnings stop growing because they have saturated the markets and have new upstart competition to contend with.

On the other hand mania stocks like anything with -tronics on the end in the sixties or .com in the late nineties are bought on beliefs of future earnings. Many times the companies make no money and they try to valuate based purely on future speculations of technology or products. Many times they invent new ways to valuate like ‘eyeballs’ in the nineties for websites. Many times mania stocks are simply in the sector of the real winners and are fueled by pure speculation. If they do not have negative earnings they have absurd 100-200 price to earnings ratios on what little earnings they do have., Webvan,,, and many more were pure speculation plays and were way ahead of their time, they crashed and burned into being nearly worthless, because they were! Mania stocks flame out relatively quickly and go down to their true value, close to $0. During that dot com mania the real monster stocks had real earnings and growth AOL online and Cisco were monsters not mania and ran up for many years because of earnings growth. Of course they to ran their course but made some millionaires in the process and their stocks died a much slower death even as the companies remained profitable.

Apple: Dominating the cell phone and tablet industry.

Price to earnings ratio 16.

Closing in on $100 billion on the balance sheet.

Its founder and turn around artist was a modern day Thomas Edison.

World class corporate culture of excellence.

Last quarter earnings per share +116%. Last quarter Sales +73%

The biggest complaint is that they are just too big to maintain their growth.

But are they too big to grow, or too big to fail?

When I look at where the world’s consumer capital is flowing it is Apple. Shouldn’t our trading capital follow it?

Mania OR the greatest Monster stock in history?