Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Are Apple Inc. (AAPL) Shares Rotten?

After spending most of the day in negative territory, stocks pulled out a win in the last part of the session,  with the
S&P 500 (S&P Indices: .INX) and the narrower, price-weighted Dow Jones Industrial Average (Dow Jones Indices: .DJI) ultimately gaining 0.5% and 0.3%, respectively.

The VIX Index , Wall Street’s fear gauge, responded well,  falling 9% to close a hair above 14. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)

Apple Inc. (NASDAQ:AAPL)What’s going on with Apple Inc. (NASDAQ:AAPL)?
It used to be that investors couldn’t get enough of Apple Inc. (NASDAQ:AAPL) . Now, the stock appears friendless. Today, for example, the shares lost 2.5% while the broad market advanced 0.5%. That decline produced a new 52-week low and put the company’s market capitalization below $400 billion.

According to the folks at Business Insider, star bond fund manager Jeff Gundlach predicted last year that the stock would hit $425, so they went looking for a follow-up comment (the shares closed at $420.05 this afternoon). Here’s how he responded:

AAPL over the last six months offers a textbook case study in market behavior and effectively debunks efficient market theories. The weakness is all the more remarkable because it has occurred within the context of a strong overall US stock market.  SPX up 5% since September 19, 2012 and AAPL down 40%. [Note: SPX refers to the S&P 500.]

Is Apple Inc. (NASDAQ:AAPL) a counterexample to the efficient market hypothesis, according to which stocks are always fairly priced because they reflect all relevant information at any given time? I’m not sure, but I think it certainly points to herd behavior among investors that produces stock price momentum (positive or negative). Take a look at Apple Inc’s. (NASDAQ:AAPL) performance relative to the S&P 500 since the second quarter of 2012:

AAPL Chart

Source: AAPL data by YCharts.