As Apple Grows Ever Bigger, Will Investors Fear Size?
Again, the ability of Apple to continue its march higher was called into question, after two high profile reports raised concerns about the company’s enormous market cap.
A report in the New York Times says, “Here is the rub: Apple is so big, it’s running up against the law of large numbers.
The Times went on to cite a mathematical theory from 17th-century Swiss mathematician Jacob Bernoulli and translated it into modern day. Says the Times, “In the case of the largest companies, it suggests that high earnings growth and a rapid rise in share price will slow as those companies grow ever larger."
Meanwhile, the Wall Street Journal also talked about Apple’s market cap - they say it's becoming a problem for the market broadly. The Journal goes on to say that the iPad maker'ssize is so problematic that some analysts are factoring it out, completely.
“Earlier this month, Jonathan Golub, the chief U.S. equity strategy at UBS AG, caused a stir among his clients by publishing two versions of his regular quarterly earnings update: one for the companies that make up the S&P 500, and another for what he calls "S&P 500 ex-Apple," says the Journal.
As two of the nation's most respected periodicals turn a spotlight on Apple's market cap - investors have started to fear that Apple has gotten too big.
After all, at over $500/share a block of 100 shares costs more than $50,000. That's no small chunk of change for many retail investors.
How should you trade Apple?
Despite the concerns mentioned above, largely, the Fast Money pros think the Apple trade remains long. They're not worried about the market cap. Not only do they cite an ability for Apple to win greater share of the computer market as a market catalyst, they also think the enterprise market is ripe for the picking.
“The enterprise market, that will be big for them,” says trader Stephen Weiss. He thinks professionals are growing tired of BlackBerrys, which have dominated.
Trader Pete Najarian shares Weiss' enthusiasm. “I continue to add to my Apple position,” he reveals. And he says institutional investors are doing the same. He’s still seeing a great deal of call buying.
If the price of the stock makes Apple out of reach, he suggests playing the story with options. “That’s how I’m doing it,” he says. “With options. That requires much less capital.”
DO YOU KNOW?: Why are optimistic investors called bulls. Click here and find outin the latest installment of our Wall Street History series.
Trader Steve Grasso is the only trader who is skeptical – and his skepticism is relative. His concern is that a dividend is baked into the stock and that CEO Tim Cook may not be able to implement one because “Steve Jobs was so opposed to paying a dividend.”
Jon Najarian isn’t concerned by that. If Cook doesn’t pay a dividend, Najarian thinks Cook could initiate a buy back.
And Najarian thinks a buy back would now be perceived as consistent with Jobs’ philosophy. “What better thing to do with its cash than buy Apple stock – the return is much better.”
What do you think? We want to know!
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Trader disclosure: On Feb. 27, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Weiss is long JPM; Weiss is long EUO; Weiss is long QCOM; Weiss is long HAIN; Weiss is long WLP; Weiss is long HYG; Weiss is long HK; Weiss is long CSC; Weiss is long HPQ; Weiss is short ANR; Weiss is short MT; J. Najarian is long AAPL; J. Najarian is long AMCC; J. Najarian is long CRM; J. Najarian is long CROX; J. Najarian is long FIO; J. Najarian is long HTZ; J. Najarian is long MA; J. Najarian is long RIG; J. Najarian is long UTX; J. Najarian is long SLV; J. Najarian is long CIGX; J. Najarian is long CBOE; J. Najarian is long CME; Murphy Short WHR; Kilburg is long TLT; Kilburg is long USO; Kilburg is long crude oil futures;Grasso is long ASTM; Grasso is long AVAV; Grasso is long BA; Grasso is long D; Grasso is long FIO; Grasso is long MHY; Grasso is long NUAN; Grasso is long MO; Grasso is long PFE; Grasso is long PRST; Grasso is long RIG; Grasso is long S; Grasso is long XLU
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