Finding Buying Opportunities: An Analysis of My Apple Trades
Apple (AAPL) is one of my favorite stocks to follow for a number of reasons. For one, I believe the company to be incredible with regards to innovation and the way they push the envelope with their products. I love it as a long term investment, and I love to follow the shifts in momentum and volatility that cause the stock to move quickly up and down. I wish to analyze my performance with regards to trading Apple over the past year in order to learn from my mistakes and make more frequent my successes. I hope you can learn from this analysis as well.
Trading activity since May 1, 2007 (shown in the chart below):
- 5/1/2007: BUY 33 shares @ $99.57
- 5/24/2007: SELL 18 shares @ $112.63
- 5/31/2007: SELL 15 shares @ $120.84
- 6/22/2007: BUY 25 shares @ $124.06
- 6/25/2007: BUY 25 shares @ $124.58
- 7/2/2007: SELL 25 shares @ $121.08
- 7/5/2007: SELL 29 shares @ $130.75
- 11/07/07: SELL 18 shares @ $190.40
- 1/09/08: BUY 22 shares @ $171.73
- 3/05/08: BUY 10 shares @ $122.60
- 5/1/08: SELL 7 shares @ $179.46
- Average buy price: $127.07
- Average sell price: $139.16
- Realized gain from sale of 83 shares: $1003.82
- Unrealized gain: 61 shares @ $184.73 each: $3517.46
- Trading commissions paid: 11 trades @ $12.95 each: $142.45
In analyzing the moves I have made in Apple, I came to the following conclusions:
- Too many trades – Early in my position building of Apple, I would buy and sell, then buy and sell again. Not only did this incur excess trading costs, but it shows I was very indecisive with regards to investing in Apple. I clearly did not do the proper research and make a solid decision whether or not to invest my money with Apple.
- Buying opportunities – One of the most important principles of investing, and one I talk about at length on this blog, is the concept of finding buying opportunities. Finding the right buying opportunity for your investments can make a huge difference in return. Such a skill is one of the primary factors with regards to Warren Buffett’s success. With the exception of the buy on January 9, 2008 at a share price of over $171, all other buys seem to have been decent entry points. At this point, I don’t think Apple is a good buy. I will be adding to my position on any pullbacks, especially if the stock breaks the $150 mark.
- Selling when the stock is overbought – The sell at over $190 a share in November of last year proved to be a great sell. The stock seemed to be getting overhyped and overbought, so I decided to raise some cash. This was strictly a play based on stock activity, as I still had complete confidence in the long term potential of Apple. My recent sell at just under $180 was also to simply take gains as the stock has had a recent huge move up from its lows. If the stock hits $190, I will probably sell another chunk. I think the stock will continue to climb until Apple releases the much anticipated 3G iPhone (rumored to be in June).
Lessons To Learn
- Do your proper homework and make your decisions with conviction. Don’t move in and out of stock in a short period of time like I did at the beginning of the above chart.
- For most long term investments, you don’t want to sell your positions unless there are special circumstances. Apple, like other momentum stocks, tends to have high volatility and has overreactions both to the upside and the downside. The above trading demonstrates my attempts at taking advantage of such overreactions. Overall, I was fairly successful. The great thing about these momentum stocks is that buying opportunities will definitely present themselves. Be patient and wait for the right buy.