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Ahknaten Likes AAPL Tables -- Apple Part Two

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I love my IPod. I seriously love it. I won two of them and I love each one. I love the AAPL store. I love the store's layout. I love the furniture in the store. If you happen to know who makes the nice wooden tables in the stores, let me know. I especially love the tables. I don't love the stock. I could spin a positive story to an investor looking for a stock. The story could go like this:

"You like the IPod eh? Well, check out that nice stock graph. Sweet eh? Ever walk into an AAPL store and see all the people and the cool toys? Awesome. See all the people buying the cool toys? Sweet. I-Tunes is awesome. I use it. I love my I-Pods. Just imagine if they sent this stuff all over the world. See the growth? Wow. Cool toys for the world. Don't all your friends either have one or want something from AAPL? Don't you think that Microsoft/Intel think that the AAPL advertisements must be creative? Sweet advertisements, sweet product, sweet store, and a sweet stock."

Here's the thing. I don't buy that argument and as I look at the stock more, I dislike it more. I have some experience with AAPL. It's not much, but it's some. I walked into an AAPL store this weekend and noticed a lot of folks buying a lot of things. It was nice to see. But, I also noticed how the mall I was walking in was opening a series of other stores by other wireless competitors. One only needs to look at Porter's Five Forces to realize the "threat of substitutes", making it's way into the market. If AAPL can do it and have great margins, certainly expect the competitors to join in. I love I-Tunes and I used to buy a lot of videos from that website, but then something came along... Facebook and from there I learned that I could link free movies from Yahoo. Free videos? Yes. I could log on, view a video and listen to some music. That seemed to be a much better deal than paying some money to I-Tunes when I could see something for free on Yahoo. Isn't that a "Threat of Substitute"? Sure, AAPL will keep reinventing things, but those reinventions only last for a little while, and it's not long before the others will catch up, margins will drop and innovation will need to move forward. People might be very optimistic for AAPL that it's creating a world-wide network of media, and perhaps it is, but I think those views are a bit too optimistic. Aren't views like this best viewed by looking at the past at other world-wide 'hot phenomenon's'? Microsoft? The internet?

I had already mentioned about the PE, price/book and insider selling, but perhaps there were some other stats that bothered me as well? How about asset turnovers? Aren't they declining? Isn't that a bad thing? So perhaps the asset turnover was declining and they're trying to build these stores to increase turnover? But, if they build new stores, then won't that hurt margins? Does it mean that they need to compete much more aggressively because other stores and companies are modifying their product lines as well? The accruals are high. Academically it's been shown that high accruals are a bad thing. Hmmm... Seems like a red flag to me.

So perhaps my AAPL story could go like this:
"You like the IPod eh? Cool. Maybe you should buy your IPhone and IPod and love your store and your cool looking AAPL computer, and perhaps you should short the stock as well? Perhaps? I dunno. It's just that it smells like a 'hot stock' right now. The valuations are rich, there is some insider selling, I see it's had some decreasing asset turnovers and high accruals. I notice that I can't seem to justify the valuations and I wonder if they can really keep up with beating analyst estimates by 0.10 to 0.36 cents each month. You do realize that next quarter, if they don't beat by 0.10 cents, then it might look bad, right? Sure, it's a growth story, but can growth really continue so much? Don't you think that other competitors will kick in? Hmm... I see you made a valuation and it looks undervalued, may I ask you... oh dear analyst... what were your terminal ratios in your valuation? Or did you just take the PE and multiply it by the EPS? But wait, you love the momentum. And I would argue that momentum is a factor in the market. But as you like it then is it a good guess to presume that perhaps some funds are bailing out of the stock now? It's just a thought. If you do love the volume and returns, you must certainly not only like AAPL, but do you like RIMM, RIO, JNPR, AMZN, FCX, CROX, VIP, NOV and GMST as well? If not, then why not? Those seem like 'hot' stocks to me. They might even do well for momentum-based trading games. They have nice charts, don't they?" So perhaps I'm a bit cynical and perhaps I'm a contrarian and perhaps I have no idea what I'm talking about. I don't know. But, as I look at this stock a bit more carefully, I seem to see more negative aspects than positive ones and for that reason I cannot in good conscious recommend it as a buy (unless it's for risk/diversity purposes) and for the time being it sure seems like a short to me. But then again, remember to do your own due diligence.

And if you know who makes those AAPL tables, please let me know. I want an AAPL table

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