Overripe Fruit (FNV, AAPL)

When the newspapers get shrill about absolutely everything that transpires in Washington, screaming maniacally that the train is off its tracks and careening headlong toward the Whos down in Whoville, and that we’re all doomed, there’s a killer on the road, the zero hour awaits, etc. etc…. it gets to be a little ho-hum.

 

So we say, anyway.

 

That never-ending, fever-pitched scream eventually morphs into an almost soothing, anesthetic sound – not quite a lullaby, but something akin to that, and one’s eyelids begin to flutter and before long the doze benumbs.

 

And at that point only one thing is certain…

 

When a genuine crisis hits, or a real scandal is thrust upon us, everyone will be fast asleep.

 

No one, but no one, is going to listen.  We’ll be a nation of Neros, fiddling as the country burns, because the hellfire screech of the media, sounding the greater alarm, that the sky was falling (when it wasn’t), inured us completely to the sound of a genuine siren.

 

We’re being drugged, friends.

 

Call it the incessant noise drug.

No, not yet.  But we are rapidly approaching that hour when the whole thing will come unwound.  And because of the sorry antics of a jackal-like press, we’ll have no one to rely upon at that time to tell us the truth when the news that really matters breaks.

 

So much for the media.

 

We’re not the first to write an obituary for the mainstream press.  A lot of folk are unhappy with what’s transpired of late in the press gallery – the election and post-election coverage, we believe, was just the most recent and blatant example of how egregiously irresponsible and agenda-driven the MSM has become.

 

To quote our sitting president:

Oops.  Wrong guy.

 

In any event, you can count on Normandy to tell it like it is and set the record straight when it needs doing, but in the meantime…

 

Let’s get on with things by examining a trade that now requires your attention.  It was opened back on the 10th of January in a letter called Royalty’s Ups and Downs.  There, we urged you to buy 100 units of FNV.WT.A, Franco Nevada’s exchange traded warrants, on the Canadian market (where they were trading for $12.03).

 

We explained our thinking as follows –

 

FNV has retreated appreciably, but has just bounced off its long term moving average, generally considered a strong line of support.  The last day’s trade also saw her MACD indicator punch above its waterline, confirming a similar move by RSI some two weeks back.  These are bullish signs, and we say it’s time to act on them.

 

As of last Friday’s close, our instincts and analysis proved correct.  The warrants were trading for $14.75, and we say it’s time to sell them.  Do it now and you walk away with 23% in four weeks, an annualized return of 299%!

 

Pour a little sugar on it, baby!

 

Now, for this week’s trade…

 

The world has gone tech mad, and even though it’s our firm belief is that this aspect of modern life will not be maintained forever (that is, that we’re going to return to a somewhat more ‘primitive’ future, shall we say), for the time being it’s all about code, clouds, handsets and robots.

 

A look at the largest companies in the U.S. by market cap reveals that five of the top six are tech companies – if one includes Amazon, as we do.

 

They are, in order of size: Apple, Google, Microsoft, Facebook and Amazon, with only Warren Buffet’s Berkshire Hathaway sneaking in to crash the party.

 

Have a gander –

These numbers are astounding.

 

Just those five companies alone have a market value well in excess of two trillion dollars (black square).

 

And a look at how much of that value has been added since “the TRiUMPh” is equally mind-boggling (white square).  There, the figure is approaching a surreal $200 billion, if you include Berkshire – another fifth of a trillion!

 

What the hell do you do with numbers like these?

 

Well, we, for starters, were not willing to let the whole thing pass unexamined.

 

So we looked to the charts.

 

And what did we find?

 

To put it simply, there were four big tech companies whose stock trajectories were angled higher in a more or less benign fashion, and one that spiked heavenward like Clydesdale on Viagra.

 

How could it be, we asked ourselves, that even with earnings topping analysts’ estimates, a gap could open in Apple’s stock like we saw last week.

 

Take a peek –

As mentioned, Apple surged on earnings of $3.36 when Wall Street was expecting just $3.21.  And that’s great stuff, to be sure.  We’d also add that Apple’s current P/E is 15.5, not a wacky figure for a company in the tech realm, even if we are talking about a firm with so well established sales growth.  On top of that, consider that the stock also offers investors a very reasonable 1.77% yield.

 

So could AAPL rise further from here?

 

That’s for damn sure!

 

According to the fundamentals, we’re not yet at blowout levels, and both growth and value investors might well consider taking a position at current prices.

 

But the technicals tell a different story, and wise investors would do well to consider them.

 

According to the steep gap higher we saw last week (in red) that placed the shares in deeply overbought territory (green), we’re likely to see a cooling period for the stock that could last for anywhere between three and six weeks.

 

Additionally, a gander at the weekly chart reveals that we’re coming up against some old resistance at the $135 level.  That’s where the stock last topped out roughly two years ago.

 

Look here –

Our strong feeling is that any break higher at this point would have to contend with a great number of sellers at $135.

 

And for that reason we’re urging you to sell CALLs precisely there.

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With kind regards,

 

Hugh L. O’Haynew

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