Tuesday, October 25, 2011

An Apple Trade in Review

Three months back, I was ruminating about my increasing interest in Apple and wondering whether it was a good idea to own Apple as well as companies that compete with the tech giant.
Ultimately, I decided to put my money on Apple (AAPL) outperforming those companies. I sold off two-thirds of my Adobe (ADBE) shares. I liquidated my position in touchscreen maker Synaptics (SYNA.)
I felt pretty good about it then.
So, how did that play turn out a quarter later?
It was looking pretty smart until last week.
As part of the trade, I had sold my Adobe shares around $25, a hair above my average buy price.
It's since inched up to $28.20. That's about a 13% gain.
Not too shabby.
Synaptics is a much more interesting story.
 I sold off Synaptics at $26, and the stock subsequently lagged for two months. It reached a low of $22, and it looked like investors were about to leave the company for dead.
Then, something turned.
First, the company's new CEO started talking about new growth opportunities.
The stock started to tick higher, up past my sell price.
Then, it reported earnings last week. And it blew up.
The stock is up some 25%.

Tale of the tape
Those are some nice gains, indeed. But, how did Apple do over that time? 
Not bad. But not as well.
I picked up my Apple shares around $370. It closed Monday at $406. That's a hair under a 10% gain.
If I'd made the switches all on that same day, I'd have been up a bit on Apple over Adobe, but still trailing mightily on Synaptics.

The second guess
So, would I have been better off leaving my money where it was? Should I have hedged my tech bets instead of putting all those eggs in one basket with Apple?
I'm not quite ready to pass judgement on that yet.
Apple still looks underpriced to me, with fantastic growth and a price-to-earnings ratio under 15.
But it's an absolute behemoth, and moving that price won't happen as easy as it will for smaller firms like Adobe and Synaptics.
And this comparison has to take into account the first Apple quarter that failed to meet expectations in a long time. I think that will be an anomaly.

The hidden gem
Perhaps my biggest regret in selling off a company like Synaptics to later see a nice run up is that it's a small company I found through my own stock screens and research. It's hard to let those companies go in favor of a "safer bet" like Apple.
I'm going to check back on this trade in three months to see where things stand. But for now, it looks as though the three companies can exist in the same portfolio just fine.

I have not updated my portfolio in a while, but here's a look at my holdings as of September.

Wednesday, October 5, 2011

Are There Safer 'Safe Havens' Than Gold? Part II

 Precious metals have gotten a lot of attention as a safe haven over the past few years, and with good reason: They've had a great run at a time when the stock market has just been crazy.
But while gold is mighty alluring, its sharp run upward in recent years leaves me worried about a potential bubble. That has me looking for alternatives.
Since the other precious metals don't appear to be any safer a haven than gold, it's time to shift focus away from all that glitters.
But there are other places to put money that offer some measure of safety in uncertain economic times while still giving you the opportunity to make your money grow.
One of those is foreign currency.
There are ETFs tracking the Euro (FXE), the British Pound (FXB) the Japanese Yen (FXY), even the Mexican Peso (FXM).
But the one that truly has had my interest as a good hedge against a bad market is the Swiss Franc.

Change in course
Nothing is ever a no-brainer, but the Swiss Franc ETF (FXF) seemed like a real low-brainer to me a month or so ago.
From July 2007 to July 2011, the Swiss Franc was up 52 percent.
It weathered the market crash of 2008 with just a 15 percent drop and a quick rebound.
What's more, the Franc had turned upward with growing economic turmoil.
It nearly matched gold from July 2010 to July 2011.
The FXF looked like the hedge I'd been seeking.
But then ...
In early September, the Swiss National Bank dropped a bombshell. The safe harbor currency was suddenly going to be tethered to the value of the Euro.
Here's a look at what happened to the Franc ETF since speculation about a Euro-based cap on the Franc's value surfaced.
Not very encouraging.
But with all the economic trouble in Europe, who can blame investors for turning away from the Franc?

Other currencies
Over the past few weeks, I've read numerous articles about other "safe haven" currencies that could replace the Swiss Franc. The British Pound, Japanese Yen, Australian Dollar (FXA), even the Norweigan Kroner have turned up as good alternatives.
Granted, my research is by no means professional. I'm a lay investor.
But I tend to agree with this article, penned a couple months before the Swiss Franc took a turn downward. Other countries' currencies could not stand up to the Franc simply because the countries were all carrying major debt, or had a history of monetary tinkering that the Swiss did not.
It was the only true safe haven currency then. And now that its value is leashed to the Euro, it's no longer the safe haven it once was.

So, my quest for a better safe haven than gold continues.
As always feel, free to offer suggestions.

See my portfolio here.