Hedge Funds Apple

Hedge Funds Apple

Are Hedge Funds Hoping for an Apple Slingshot?Notes

While most investors were let down by the Consumer Reports' recent criticism of Apple's iPhone 4, hedge funds might have been cheering. The report caused a drop in Apple´s shares and hedge funds seem to be looking at this as an opportunity for what one financial columnist calls the Apple Slingshot, where hedge funds are banking on a bounce back in the share price following this buying opportunity.

Monday was the Consumer Reports release so what do the Hedge Fund’s do on Tuesday? They feed the media with stories of a recall, ‘PR experts say an iPhone 4 recall is inevitable!‘ Beyond this kind of hysteria, the truth is that under a worst case scenario Apple would recall the few million iPhone 4’s that have been sold and the problem would be solved. The scope of such a recall for a company with approximately $45 billion in cash is inconsequential. A second alternative to this reception problem would be to re route antenna efficiency by way of a software update. This solution is most likely.
The third alternative would be to include a free bumper cover with each iPhone 4 purchase. As a side note, Apple might be making more money from the $29 bumper than Google makes from its Android OS but that’s for another article on another day. The hedge funds know an iPhone 4 solution is coming but that doesn’t stop them from taking full advantage of the trading action. Everyone selling today is already plotting their re-entry on Thursday, Friday, or Monday ahead of earnings.

If the iPhone 4 was really a flop it would be because consumers genuinely did not like the product and I would tell you to exit the stock because the string of Apple innovation had run its course. That is not the case here. The iPhone 4 is off to the best sales start of any smartphone in history, Apple can’t keep it in stock, and 80 more countries are eagerly anticipating the international launch this fall. Investors should be buying this slingshot dip as the bounce will be fast and furious when it arrives.  source

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