Why did we sell that stock? What was wrong? What were we thinking?
I have become convinced that the stock market, perhaps because of the algorithms that control so much trading, has a terrible case of attention deficit order which often produces days like today.
Just so we are on the same page, if you google Attention Deficit Disorder you come up with "attention difficulty, hyperactivity and impulsiveness" and I think the three of these traits truly defines what has gone on with tech stocks since this reporting period began.
Let's start with Apple (AAPL) . We know Apple pre-announced a weak quarter, largely because of a gigantic decline in Chinese iPhone sales. That generated a freakout for certain and it traded down to 13 times next year's earnings. As usual I said own it don't trade it and felt the shares had been overly punished.
Then on January 8 with the stock at $150 I sat down with Apple CEO Tim Cook and he outlined all of the long-term positives that Apple has going for it, especially health and wellness stemming from watch sales. Cook made it very clear that, once again, the company has been written off and that's when you want to buy the stock.
Sure enough when the company reported, Tim made a point of telling me and Josh Lipton that January was better for sales, making me feel we have put in a bottom unless we break off all trade talks as Chinese sales are too important to eliminate from the equation.
Again the call made it clear that ex-China sales were incredibly strong although it was hard to see because of the dollar conversion. The company said watch sales were constrained but the positive impact to the health care system is quite obvious. Apple also allayed fears that the service revenue stream was slowing down. It remained robust.
Now this morning JP Morgan' s Apple analyst posited a host of acquisitions that could keep that service stream flowing: Activision Blizzard (ATVI) , Sonos (SONO) and Netflix (NFLX) being the most prominent.
I was a bit surprised at this. I know I, for one, pushed hard for Apple to buy Netflix at $25. They didn't want it. I doubt they want it at $349.
Activision Blizzard has had a series of surprisingly weak quarters and I can't think about why they would want to ally themselves either with the declining Activision programs or the video games themselves as that business seems to be slowing.
Sonos? Doesn't move the needle. I think the idea to buy a house sound system company for a couple of billion would be poorly perceived. Maybe desperate even.
If Apple wants to buy something to fulfill Tim Cook's vision of saving lives with the Apple watch he should do something that gets that handshake going between the medical establishment and the watch itself. A partnership with Johnson (JNJ) on A-Fib or with Mayo Clinic on congestive heart failure would be terrific and you would pay $10 a month for that but I just want all my medical records from all different hospitals to talk to each so they can be on my watch. We've talked about this before. Now, though given the stock is well above where it was when Cook talked to us -- up $20 to be precise -- we have to hope that something's going on besides the trade talks.
When we thought of Facebook (FB) before the quarter was reported we thought of a company that viewers and readers had turned on, a failed place to be able to come together, a sense of community gone awry. To read the articles from competing news outlets -- and I think that's a safe thing to call them competitors because they all want your eyeballs -- is to think that advertisers dare not be affiliated with them.
But when we saw the numbers we recognized that there had been no diminution and the advertisers loved more than ever with 2 billion people using some form of Facebook every day. We may hate them; I think a lot of people do, but Facebook turned out not to be Myspace, which was actually talked about ahead of the quarter, and instead turned out to have the best reach of any property out there.
Lots of times I like to read conference calls in a vacuum -- not paying attention to how the stock reacts -- so I can arrive at my own view on what will be the reaction. Last week I read Microsoft's (MSFT) quarter and I saw tremendous growth with Azure, the web services company. However, I read that a chip shortage put a crimp into their personal computer line which kept them from blowing away the numbers.
I have been following the chip shortage via Intel (INTC) and AMD (AMD) and HP Inc. (HPQ) as well as a gaming company trying to build out a national network of game sites who can't get the chips he needs to have the dream come true.
So the chip glitch wasn't surprising. Somehow, though it was surprising to the people who owned the stock and unceremoniously bailed because of it. There's the attention deficit disorder again. I think Microsoft can go to all- time highs.
And how about Amazon (AMZN) ? Tougher. There were two things that brought out sellers: the India market which so many companies lust for and the gross margins on retail and whether they have peaked. No one seemed to notice the dominance of their web services business. Everyone seemed blind to the growth of the advertising stream. They were just focused on the gross margins of retail and the inability to the price of Prime again to make up the difference.
I think that Amazon's like the Patriots. If you recall the Pats beat the Falcons and then lost a heartbreaker to the Eagles -- at least if you have the luxury of being from New England and then won last night in a tour de force albeit a boring game.
Do you think that Bill Belichick just kept his game plan the same that he used against the Eagles? Do you think that Jeff Bezos isn't perturbed if the gross margin pressure is crimping profit? The exec adjusts so he can win next year.
That requires patience, something the attention deficient disorder hobbled traded can't deal with.
I say that's all the better. It's how you have always gotten good prices for the stock of Amazon.
The moral here is simple we forget quickly why we sold because it can be in the fog of battle and our panic is dictated by the futures or by Jerome Powell or by a presidential tweet or by an errant line in a conference call.
It's worth remembering that before you bail for a good but ephemeral reason.
