Time To Buy Apple!

I don't own Apple stock. But I do consume alot of Apples. 

We collectively own several Apple products in the household including an iPhone, 3 iPads, 2 Apple notebooks, and 4 iPods.  We also own 2 Blackberries, a Dell desktop and a Dell mini laptop--which is not very popular since the iPads entered the picture. Sure I miss Flash and a few other applications that make my personal iPad frustrating on occasion, but not enough to force my hand to replace my tablet with a RIM Playbook.

I firmly believe Apple stock is undervalued.

I have not been a bandwagon stock purchaser, and therefore Apple shares elude my portfolio.

According to Recognia, the little research program that comes with my brokerage account, Apple shares are undervalued by 67%. Wow. For comparison, Google shares are noted as undervalued by 72%., Microsoft by 20%, and Nokia--the major competitor for Apple's iPhone, is listed as overvalued by 17%.

Stephanie Link of The Street recently commented that Apple is the "It" product story of the world. Apple is all about applications. They have the most, boasting 65,000 and growing. They have a huge share of the cellphone and tablet market--in fact no other company comes close.

Apple has the uncanny knack of being able to create products that we never imagined needing and making them a "necessity".

Cueing Up for Apples

Ya, there are line ups for products, backlogs and some disgruntled customers frustrated at the lack of immediate gratification, but few walk away and most are content to wait. No one doubts Apple can meet demand. And certainly if they continue to produce the products consumers want, line ups will continue to form.

Recent history supports Apple's market dominance as always the first one out of the gate on new technology. Apple has alot of cash, great management and a strong research and development team.

Apple Looks Enticing Right Now

At the current price of $350 per share near it's 52 week high, Apple stock is still very attractive. Analyst estimates predict numbers between $375 and $450 for intermediate term stock growth and the Chinese market for Apple products is growing exponentially as they too ride the cultural move from laptops to tablets.

Looking at the Yahoo Finance technicals, RSI is neutral, the stock is trading above its 200 day MA, Slow Stochastic is ticking up and volume has been average but landing on the sell side of the pendulum since mid March.

So is it time to buy Apple?

Recognia produces several bullish signals of late: a gap up, price cross over 50 day MA, MACD and Slow Stochastics pointing in the right direction and good momentum. First target price is $365.28, an area of previous resistance, and when you add up the psychological factors, more than 90% growth year after year and the current technical indicators, I can't find a reason not to buy me some Apple.

As well, the US dollar is currently riding lower than our buck which gives me further incentive to take a position.

Analysts Love Apple

Most analysts consider Apple a strong buy or buy with only one analyst out of 54 listed on Yahoo Finance considering Apple a sell--who is this guy anyway? Perhaps he owns Nokia.

Apple beat the S & P 52-week gains by 41% (10.65% versus  31.61%) with 921.28 million shares outstanding, a few of which will be mine after the Easter holiday.

So, it's apple pie for Easter, and Apple shares when the markets reopen. 

Happy Easter and Happy Investing!

Disclosure: the author does not own shares of Apple, Nokia or Google as of publication.

The Alpha of Canadian Hedge Funds

Meet The Top Dog of the Canadian Hedge Funds

I recently overheard a couple of colleagues chattering about investing in hedge funds and between the technical jargon and comparison gibberish, the only phrase I clearly understood was this:

"If I had 150 thousand bucks, I'd give it to Steve Palmer."

Researching the Markets

After a single quarter of trading, I seem to be at a near break-even point. Having heard horror stories of newbie traders losing 50% or more of their investment dollars in the early days of their trading, I suppose a mere 0.5% earnings profile is not such a bad place to start. Of course I could have earned more working at my regular job, but I see it as an educational  sacrifice that cost far less than any university level course on the markets.

So what did I learn? Other than "keep green on your screen", a favorite Toni Turner sign-off to her twitter updates, I learned that there are good gurus, bad gurus, good funds, bad funds, and that everything is in flux always. I learned there is no sure thing and that psychology plays a major and often under-rated factor in the markets. I learned that technical indicators and Newton's laws of physics also play an often under-rated factor in the way the markets naturally move. I learned I am stupid about these matters and should listen to people with a track record while at the same time executing my own due diligence to confirm that at the very least I agree in principle with the advice.

So what does this have to do with Steve Palmer. Well, everything. Mr. Palmer fulfills the criteria of a good guru and manages a fund that fulfills the criteria for a first class investment. Of course, I would need 150 grand to walk through his Front Street office door, but hey, at least I have a goal.

So Who Is Steven Palmer?

Steven Palmer is a founding partner and Chief Investment Officer of AlphaNorth Asset Management, and runs their Partner Fund. After launching his investment career in 1997, Mr. Palmer became the Vice President of Canadian Equities at a major financial institution and subsequently managed a pooled fund of primarily small cap Canadian companies achieving a first rate ranking and returns of 35.8% over 9 years as compared to 10.0% for S&P/TSX Composite Index and 13.0% for the BMO small cap index.

He has an impressive track record for his young years and seems to make people lots of money, particularly investing in small cap Canadian companies, one of the most volatile, yet potentially most lucrative, investment fields.

Why is AlphaNorth so Attractive?

AlphaNorth Partners Fund is a "long biased hedge fund" launched in December, 2007, focussing on Canadian equity securities and offered to "accredited investors".

Returns Since Inception
(Dec1, 2007 to February 28th, 2011)
                                                            Annualized    Cumulative
AlphaNorth Partners Fund               48.7%            262.9%
TSX Venture Index                           (4.1)%            (12.6%)
TSX Total Return Index                    4.0%               13.7%

Sure the fund dipped low in 2008 with nearly every other fund on the market, but it regained its lofty standing with a vengeance to earn an average annualized return of 48.7% since December, 2007. Big performance, big fund and a big ticket price of $150,000 initial investment. Not for the average Canadian, not for the faint of heart.

The Historical Accredited Investor

Bottom line, you have to have money to make money. And you need to be an "accredited investor" to buy a piece of AlphaNorth. A hedge fund is a high risk investment. And historically, the "accredited investor" class was designed to protect investors and investees against market crashes that could potentially wipe out personal or fund net worth.

Following the 1929 market crash and subsequent great depression, the US Congress intervened to set strict rules in place to in essence, "clean up" the practice of securities investing. Thus the Securities Act of 1933 and subsequent birth of the SEC, led to law that was passed which required companies to provide detailed information to investors so that they could make informed decisions. This Act also defined which investors could invest in certain securities, thereby creating the "accredited investor".

An accredited investor was defined as having "a net worth of at least one million US dollars or having made at least $200,000 each year for the last two years ($300,000 with his or her spouse if married) and have the expectation to make the same amount the following year."
Accredited investors have access to a level of investments such as hedge funds and other potentially high yield funds that the average Canadian unfortunately does not. And in all fairness, the law exists to protect that average Canadian from losing everything they own if a volatile investment such as a hedge fund crashes and burns up their life savings. It also protects the fund from having low risk tolerant investors run away at the first sign of a negative market flux.

Hedging With The Hedge Funds

From Wikipedia: "A hedge fund is a private investment fund which may invest in a diverse range of assets and may employ a variety of investment strategies to maintain a hedged portfolio intended to protect the fund's investors from downturns in the market while maximizing returns on market upswings."

Investors in hedge funds typically pay a management fee that goes toward the operational costs of the fund, and a performance fee when the fund’s annual return is higher than that of the previous year.

Check out Steven Palmer's AlphaNorth Partners Fund here.

Happy Investing

Penny Stock Pros and Cons

I keep running into emails and popup ads about penny stock millionaires investing in  micro cap "picks" and earning incredible returns in a very short time. It seems easy--spend a bit, make a lot, but is it too good to be true?

Weeding Out the Good Picks

Micro cap or "penny" stocks are defined as shares in companies with a market capitalization of under $250 million. Some of these companies are venture miners or start-up internet projects, others are well-established small companies with real income, real sales and real customers. Others have been identified as scams built to simply create an investment and scam their investors.

So, how to weed out the good from the bad? What are the pros and cons of penny stock investing.

Micro Cap Stocks Outperform

There are some very strong reasons why an aggressive investor would choose these microcap companies as a serious investment strategy.  Over the last decade, micro cap and small cap stocks have outperformed the larger entrenched higher priced blue chip companies, especially in recessionary times or during the earlier stages of recovery.

When micro caps stocks take off, they tend to rise very quickly, doubling or even tripling in a matter of hours or days. They cost less, so more shares can be purchased to earn more return on investment.

Penny Stock Newsletter Services and Marketing Reports

Microcap companies often employ newsletter services and other marketing techniques to promote their stock to investors which creates an environment of hype and increased interest in the stock which then sends the price higher rather quickly. These same newsletters often provide in-depth coverage of the micro cap companies which help investors better understand their structure, focus, direction and financial status.

Not for the Risk Averse Investor

These stocks are volatile and often trade on limited volume making them very risky investments. It's sometimes difficult to gather accurate unbiased research on the company or to know if the business is a legitimate.  Some of these companies are venture projects with no clearly marketable product as yet and of questionable financial status.

How to Sift Through Penny Stock Jungle

Penny stocks trade less on fundamentals and more on sentiment. A hyped stock may spring up as the "next big thing" only to drop dramatically a mere hours or days after the spike as day traders and scalpers take profits. Some newsletter services may not be considered reliable and simply act as a marketing service to hype a stock in order to drive its price up for short term investment profit.

Choose penny stock advice from recognized well-established sources that offer other larger stock investment ideas, strategies and have been in business for several years, preferably quoted by other reliable sources.

Don't invest in penny stocks if you don't have the risk tolerance required. Your investment dollars can disappear as quickly as you earn it. Investing in a sleepy portfolio of index funds would certainly be safer.

Apply the same due diligence to these stock choices that you do to a regular investment. Pass the stock through your technical analysis software, consult your financial advisor, and look carefully at the company fundamentals including market capitalization, trading volumes and length of time in business. Does the stock seem to follow the underlying index or is a confusing mess of high and lows with no apparent definable pattern that correlates with anything other than wind direction.

Places to Search for Micro Cap Ideas

Here are some places to find investing ideas which include both well established mid and large cap stocks as well as well-researched and trusted small and micro cap investing ideas:

The Canadian Venture Exchange

Pat McKeough's TSI Network

The Motley Fool

And here are some penny stock investment sites that provide various tips, strategies and investing ideas for micro cap stocks:

Canadian Penny Stock Blog

Penny Stock Rumble

MicroCap Canada

Happy Investing!

Disclosure: Microcap stocks comprise approximately 5% of the author's personal investment portfolio.