Sometimes the Herd Is Correct

James Stewart, writing for the NYT in Feb 2013, presuming that Apple’s late 2012 stock drop was inevitable and correct:

By November, with Apple stock in the midst of a precipitous decline, they were still bullish. Fifty of 57 analysts rated it a buy or strong buy; only two rated it a sell. Apple shares continued their plunge, and this week were trading at just over $450, down 36 percent from their peak.

How could professional analysts have gotten it so wrong?

As I type this, AAPL shares are trading at $115 after hours. Adjusted for last year’s 7-for-1 stock split, that’s $805/share. So those 2012 bulls look pretty smart.

It may be no coincidence that the only analyst who even came close to calling the peak in Apple’s stock runs his own firm and is compensated based on the accuracy of his calls. Carlo R. Besenius, founder and chief executive of Creative Global Investments, downgraded Apple to sell last Oct. 3, with shares trading at $685. In December, he lowered his price target to $420, and this week he told me he may drop it even further, to $320. […]

Mr. Besenius based his recommendation on technical factors — as Apple hit $700, its upward momentum and trading volume were slowing — as well as more fundamental concerns about product quality and innovation, as well as growing competition from rivals like Samsung. And there were more subjective factors. Mr. Besenius said he became uncomfortable with what he deemed Apple’s arrogance. “I loved Steve Jobs,” he said. “He built a great company. But he was one of the most arrogant C.E.O.’s I’ve ever met. The way he introduced new products was one big display of arrogance. He ridiculed Microsoft as ‘Micro who?’ That’s a good reason to be cautious. A little humility is a good thing.”

Brilliant analysis there. Steve Jobs was too arrogant in product introductions so the stock deserved to fall.

★ Tuesday, 27 January 2015