“Jobless Benefits” from Apple
NDQ:AAPL 2:30 PM EST price: $82.75
Could this be another example of our economy’s “Jobless Benefits”?
The news of Steve Jobs medical condition sent the shares of Apple tumbling after hours yesterday and in today’s regular session. AAPL shares have traded in a 52-week range of $79.14 - $192.24.
As of September 27, 2008 the company held almost $25 billion in cash or about $27 - $28 /share with no debt at all. Deduct $27 from the current quote and the business itself is selling for $55.75 /share. With trailing earnings of $5.36 for the FY ended last September that means AAPL shares are just over 10x operating earnings if you factor out their cash.
Worried about the “Jobs Report?”
Take a longer term view out to January of 2011 and sell a put or two at lower than today’s price.
Strike ….………..… Bid ……… Net Cost if Exercised
$60 ……………… $13.00 …………….. $47.00
$70 ……………… $17.50 …………….. $52.50
$80 ……………… $22.80 …………….. $57.20
While nobody can assure you that Apple shares will not be below your net purchase prices from the above list I can tell you that their shares have not traded hands below $79 since 2006. Even in 2006 the absolute low was $50.20 and EPS for the 2006 FY (ended Sep. 2006) were $2.27 or just 42.4% of FY 2008’s final number.
Disclosure: Author sold AAPL puts today as described above.
I was too consevative on this one but the results have been great regardless.
Apple shares have gone from $82.75 to $205.93 since my write-up.
If you closed out the Jan. 2011 puts that were recommended (one year early) you would have locked in these percentage gains yesterday:
Strike ………..…… Bid ……… Price to Close ………. % Gain
$60 ……………… $13.00 ……… $0.26 /share ………. + 98.0%
$70 ……………… $17.50 ……… $0.40 /share ………. + 97.7%
$80 ……………… $22.80 ……… $0.68 /share ………. +97.0%