The action has simply been annoying. Comparing multiples amongst tech really brings home the frustration.
While MSFT, INTC and GOOG see some serious multiple expansion, AAPL sees a serious multiple contraction. (The change in trailing PE is from the start of 2013 to present.)
MSFT and INTC are frustrating to watch because the WinTel duopoly is dying fast, yet the market ignores it and welcomes the expanding multiple.
Google is also frustrating to watch because it is already the 3rd largest US corporation, and its multiple was allowed to expand despite law-of-large-numbers.
Observing the decline in future earnings potential, some level of contraction is merited. Before the first quarter report, Apple was expected to maintain a trailing earnings-per-share (EPS) near $43-44. But as "realistic" guidance is given, it is now expected to be around $39-40.
From a pure quant perspective, the above makes a "bit" of sense. I use the word "bit" because the above only shows a % change from an arbitrary start date (beginning of 2013). Apple's mean PE for the last 1.5-2 years (prior to Jan 2013) was around 14.
An 11% decline in trailing EPS produced a 28% decline in the trailing PE. That seems like an inefficiency.
While every AAPL long frustratingly waits for this inefficiency to be removed, Apple has issued a huge buy-back that thus far has seemed to kick in when AAPL is near 420.
Sometimes I wish I did not understand these inefficiencies, and purely base a decision on momentum. But I always end-up realizing I hate trading with my head stuck in the mo-mo's ass.
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