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Executive Summary

The iPhone hype has sent Apple's stock to potentially unsustainable levels, as questions persist about the iPhone's future, the iPod's gradual saturation, and the Mac's sluggish market-share growth.

Sell Apple. Didn't I say this before?

Back on September 14th, 2007, I posted my first blog about Apple, and I disliked the stock.

Here is the original blog:

http://www.investorplaceblogs.com/users/ahknaten/2007/09/ahknaten_doesnt_like_aapl.php

There were some who were upset with my thoughts and I felt rather alone with my skepticism. At that time I was concerned with AAPL's valuation, insider selling, a concern of a future "big bath" and momentum traders and momentum blogs.

AAPL was trading at about $139.

To be fair, I had mentioned GIB, CSC, XRX, NOK, CHT and TMX as alternative purchases. Since that time NOK, CHT and TMX beat AAPL. The others did not. So, I'm not always right.

On Sep. 20th, I made a follow up blog here:

http://www.investorplaceblogs.com/users/ahknaten/2007/09/ahknaten_likes_aapl_tables_app.php

In that article I spoke about how I loved the wooden tables at Apple, but disliked the stock. I was also concerned about the increased competition (threat of substitutes), the PE, price/book, insider selling, high accruals and Apple's ability to beat by 0.10 to 0.36 cents each month. Now, to some the ability to beat analysts by 0.10 each month was good... but I thought of it as a bad sign... as Apple should not be able to keep up with the momentum of surprising analysts continuously by 0.10. Were the analysts just dumb? Was Apple doing some funny accounting? How could this continue? I dunno? Something was odd. Especially for such a well followed company.

AAPL was trading at $141.

To be fair, I had complained of other 'momentum' stocks such as RIMM, RIO, JNPR, AMZN, FCX, CROX, VIP, NOV and GMST as other 'sell' candidates. These were other popular momentum stocks that kept showing up in blogs. I was getting frustrated. Of the stocks listed above only RIMM (up 0.9%), RIO (down -7.2%), and VIP (up 21.6%) beat AAPL. How did the other stocks do? Well this is how they did: AMZN (down -13%), FCX (down -22%), JNPR (down -28%), GMST (down -33%) and CROX (down -48%) !

NOTE - BE CAREFUL OF MOMENTUM 'HOT' STOCKS!!!

Sure, it increases the hit counts on websites and blogs, but does it really help? Maybe. Maybe not.

On Oct. 14th, I made another AAPL article here:

http://www.investorplaceblogs.com/users/ahknaten/2007/10/ahknaten_thinks_about_fscore_f_1.php

In that article I was concerned about the accruals (Sloan 1996), earnings momentum, prepaid stuff, valuation and a high 'F-Score' that Apple had. The 'F-Score' was a score that had some predictive power of guessing which companies might have some funky accounting going on. Note - I am not accusing Apple of anything, that score can also create a 'false positive'. I was just concerned that Apple had that score. Could they get a SEC investigation?

If you're interested more about the F-Score here is the paper by Dechow, Ge, Larson and Sloan

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=997483

AAPL had risen to $167. My timing on the stock was looking rather bleak.