Apple: Not a Short–Yet–But Not a Buy Either

The past week has been a little less than exciting on Wall Street.  Stocks have been flat or mildly down every day for the past week.  It’s the sort of market that would lull a day trader to sleep.

Not that I’m complaining.  2012 has been another roller coaster of a year, and a little sideways movement is welcome now and then.  These sorts of mild corrections are exactly what we should expect in the midst of a fourth-quarter rally, and we should use them as opportunities to put new monies to work or to rebalance our portfolio holdings.

For the past month, my position has been clear: coordinated central bank easing by the Fed, the European Central Bank, the Bank of Japan and even smaller banks like the Swiss National Bank all but guarantee a sustained rally in risk assets.  In this sort of environment, corrections—when they come—will tend to me mild and characterized more by sideways movement than steep losses.

But while I remain bullish, I want to shift the topic away from “what to buy” to “what to potentially run away from.”

At the top of my list is Apple ($AAPL).  Apple is “officially” in a correction, for market technicians who like to split hairs over that sort of thing.  At time of writing the stock was 11% below its all-time high.

I do not foresee a dramatic crash in Apple’s near future, but I think investors have to be realistic about the company’s prospects going forward.

Yes, Apple is selling more iPhones than ever.  But the “wow” factor just doesn’t seem to be there like it used to be; it’s getting harder for Apple to surprise us.  The patent wars notwithstanding, Samsung seems to be getting more buzz, and Apple’s competitive advantages would seem to lack the “moat” that long-term investors like to see.

I hesitate to put too much emphasis on anecdotal evidence, but earlier today and old-friend who has been an Apple cultist for years texted me to let me know he had decided to shut off his iPhone.  It just didn’t excite him like it used to, and he couldn’t justify the $100 monthly bills.  This is a high-income urban yuppie who has paid a premium for Apple products for years.  Until now.

Looking at more concrete data, Apple has swollen to be the largest stock in several stock indices, and it may be the most over-owned stock in history by retail investors.  According to SigFig, 17% of all investors own shares of Apple, and four times more investors own Apple than the average stock in the Dow Industrials.

Professionals are equally bullish—97% of Wall Street strategists rate the stock a “buy.”

I admit that Apple is cheap at just 14 times earnings.  Yet I do not believe that the gains of recent years are sustainable.  I just don’t see where the buyers are going to come from, frankly.

I hesitate to recommend shorting Apple just yet, and I see no immediate catalyst for a crash.  But I do believe that investors can find better opportunities for the years ahead elsewhere.

Disclosures: Sizemore Capital has no position in any security mentioned. This article originally appeared on TraderPlanet.