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Short-Selling with the O'Neil Disciples: Turn to the Dark Side of Trading by Chris Kacher, Gil Morales

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CHAPTER 5

Case Study #1: Apple (AAPL) in 2012–2013

Probably no other stock in the post-dot.com era of the New Millennium epitomizes the concept of a “big stock” more than Apple (AAPL) from 2004 to the time of this writing. The company's success at reinventing itself began with an entirely new product that bore no resemblance to the personal computers upon which it had previously built its name. This new product was nothing more than an MP3 music file player known as the iPod. It is useful to understand that Apple's business model after the dot.com era, the so-called “Internet bubble” of the late 1990s, was in fact enabled by the Internet itself. The idea of providing consumers with the ability to download music from the Internet through Apple's iTunes online music store rather than having to go into brick and mortar music stores illustrates how one wave of innovation can drive a second wave of innovation. Clearly, there is no shortage of evidence that the Internet has since spawned what is truly an entirely new universe of products and services, including “Internet appliances,” that add significant value and productivity to consumers’ day-to-day lives. The rebirth of Apple is a big piece of that evidence.

The iPod helped to fuel new growth for Apple, and the stock began to ride this wave in 2004 as it began a massive price run. In 2007 the concept of the iPod was married to that of the cell phone, and the iPhone was born. The iPhone essentially turned a cell phone into a miniature ...

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