The Case for Owning Apple Through December

Fall is apple-picking season and it seems to be the same with Apple (AAPL) stock. For each year since 2004, December has posted a higher closing price than October with the exception of 2008. The average of all seven years for this two-month period is an 8% rise in price.



Even though AAPL disappointed Wall Street estimates on October 19 for the quarter ending September 24, net profit was up by 39% year over year at $6.62 billion versus the previous $4.31 billion.  Not bad growth while the US economy struggles with 9.1% unemployment.

So is now the time to buy AAPL? If you’re a believer in past falls, then perhaps it is. As we strongly state as rule No.1 in Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term: Hedge Every Investment. This means that if you’re going to pick AAPL on this dip, then protect the decision and hedge yourself.

A weekly chart of AAPL shows that over the past two years, it seems to find support at the 50-week moving average. Right now that is just over $350 and this is where we want to set our hedge.


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If you believe that there will be a pullback to the $350 level and want to wait for it to ripen just a bit more, then consider support to be at the $300 level. Again, support is where you would set the hedge.

The easiest way to set hedge for a long stock position is to simply buy a put. A put gives the owner the right to sell their shares at a particular price by a specific date regardless of where it is trading. Think of this as position insurance.

In the case of AAPL, if you were to set your hedge by purchasing a put with a $350 strike price, that means that no matter where AAPL trades, you have the right to sell the shares for $350 before the put expires. In our case, we’ll choose the January 2012 expiration period.