Apple Stock (Buy, Sell or Hold)

If you have been living under a rock for the last couple days you would've not known that Apple will be releasing iPhone today. Since Apple announced they will be coming out with the iPhone the stock has been up over 30%--which is the exact % Apple is up in my portfolio. So here's how I think the stock is going to play out--since we didn't see a huge runup in the shares in the last couple weeks of the release date we might see Apple hit fresh 52 week highs based on the iPhone selling out at some stores. However, this will be short lived as I think the stock will trade between 110 - 140. Heading into next quarters conference call I think that stock will sell off as analysts still try to figure out how to price in this new revenue from the product. I will most likely add some more to my position at this time. After that I couldn't tell you...I do know that christmas season will be a big teller to how popular this product is so expect within the next six months to be very violatile. One more thing alot of analysts will be looking to see how the iPhone affects the iPods #'s if we see iPods falling off this could be potentially bad. Here is a writers take on Apple & iPhone...

500 phone, $200 stock Right now, analysts on average expect Apple to earn $4 in fiscal 2008. Now let's figure that the analysts have blown it again by the average amount that they have been mistaken over the past four quarters, which is 27.5%. So you add 27% to the $4 consensus number to get an estimate that we'll just call $5 to keep it simple. If that's the right number for 2008, then the stock is currently trading for just 23 times our new estimate. That's pretty darned cheap for a company that has been growing at better than 30% for the past few years and is actually on the verge of a whole new product cycle.
If you apply the company's current 37 price-earnings multiple to $5 you get a target of $185. Which is not bad, but then if you are looking out two years, you need to speculate that Apple will grow by another 30% over the next 12 months. So add 30% to $5 to get a 2009 estimate of $6.50. Multiple that by 35 and you get an 18-month target of $240, or double the current price. Shares have doubled in the past year, so that's unlikely but not totally outrageous.
Although that sounds like a lot, and it is a lot, it's a target that only assumes the company's current pace will continue and does not include any possible new devices or product cycles -- or, to be fair, any risks like the potential for a total meltdown in consumer spending. So I'll ratchet down my target, and add more time, to account for any mischief and overheated assumptions out there. Nibble on Apple now for my 18-month target of $200, but add materially if and when it trades down into its 10-month moving average to around $110-$115 over the summer.

Bought Some Royal Bank

So like I mentioned yesterday--I reduced my holding in Bank Of America by about 10k bringing my position to about 18k or roughly to about 10% of my porfolio. I used the proceeds to place a position in Royal Bank Of Canada the largest bank in Canada. Here is some info on my thoughts on this trade...

Why - The mortgage market in the U.S is completely different than the mortgage market in Canada. There is not a huge "sub-prime" market and the Canadian Economy has been humming along. Which has actually caused the Bank Of Canada to most likely raise interest rates in July which was unexpected and caused the banks to give up some of their gains for the year. Royal Bank has a superiour Wealth Management arm the largest out of the Big Banks in Canada--also RY is less reliant on net interest income which is the margin deprived from deposits & mortgages than any other banks in Canada. The price drop has presented an excellent long-term buying opportunity to get into one of the best run banks in Canada.

Building a position - I put 50% of my position into Royal Bank which is 8% off it's 52 week high. I will take a wait n see approach for adding new funds depending on where Bank Of Canada is going with interest rates after it's July meeting.

What analysts think about Royal Bank courtesy of financialsector.blogspot.com

Analysts' ratings and target prices for RBC:• BMO Capital Markets maintains "outperform," 12-month target price has been raised from $62.00 to $63.00• Blackmont Capital maintains "buy," 12-month target price has been raised to $65.00• CIBC World Markets downgrades from "outperform" to "sector perform,"• Desjardins Securities downgrades from "buy" to "hold," 12-month target price is $60.00• National Bank Financial maintains "sector perform," 12-month target price has been raised to $64.00• RBC Capital Markets maintains "sector perform," 12 month target price is $64.00• Scotia Capital maintains "sector outperform," 12 month target price is $75.00• TD Securities maintains "action list buy," 12 month target price is $67.00• UBS maintains "neutral," target price has been raised from $65.00 to $66.00UBS analysts mentioned that RBC has reported its results for the 2nd quarter short of expectations due to a decline in trading, expenses associated with several acquisitions, and volatility at the insurance unit. UBS analysts expect RBC to post robust results in the forthcoming quarters, with the performance of the core global wealth management and domestic banking operations continuing to be impressive

My First Post

Sector Allocation

Financials - 30%

Technology - 12%

Tobacco - 11%

Transportation - 11%

Gaming - 9%

Retail - 7%

Foreign ETF(s) - 6.5%

Energy - 6%

So finally after months of laziness and oh ya I'll do it tomorrow I am FINALLY writing my first post. I've been running this portfolio since November 2005 and have used up all my $175,000 in cash. I try not to make many changes unless there is a material change in the economy or interest rates are either staying pat, going down or going up. However that said it's time to make some overdue changes to my portfolio which I will outline below.

Aquantative - An online digital company that was recently bought out by Microsoft I saw a nice 158% gain and now will be selling my position with a market value of over 17k

Harrahs Entertainment - I believe the largest gaming company in the world was bought out by private equity--on this position there was a gain of 30% and now will be selling my position which has a market value of 13k

Bank Of America - When looking at forecasts at the beginning of the year alot of analysts had predicted a rate cut within the end of 2007 or early 2008. BAC is by far my largest position at roughly 17% which in general is a little too big for me. I am currently down 6% on my position which is not much at all however I am going to reduce my position and here's why--I have a strong belief that a.) the subprime fallout has only begun and we might see this thing flush out over the next year or soo bringing anything that is even closley related to mortgages back down b.) I do believe that we might see a rate increase than a rate cut in 2008 which will not be good for Financials. Based on these three factors I am going to reduce my position by about 8 - 10k. BAC is a solid company and a well run bank however I am sure I will be able to pick up some shares even cheaper than where they are right now.