Major stock indexes were slightly lower near midday Wednesday on the eve of the Thanksgiving holiday, but Apple (AAPL) continued to warm investors’ hearts as it recouped more of its moderate losses seen over the prior week and a half. Shares rose nearly 1% to 174.36 in active trading.
That extends Apple’s gain from its latest breakout from a new cup with handle at 160.97 to 8%, so it’s out of the proper buy zone for now. The 5% chase zone goes up to 169.02.
XAutoplay: On | OffMeanwhile, banking shares continued to show good action this quarter, with a new breakout coming from New England-based Meridian Bancorp (EBSB). Shares bolted more than 2% higher to 20.42, rising past a 20.25 buy point in a long cup with handle.
Meridian is a thinly traded small cap with an average daily volume of just 181,000 shares over the past 50 sessions.
At around noon time in New York, the Nasdaq edged less than 1 point lower, keeping virtually all of Tuesday’s solid 1.1% advance. At 6864, the tech-rich composite index holds a 5.7% gain since Oct. 1.
The S&P 500 eased nearly 0.1%; the Dow Jones industrial average is off 0.2%. Small caps fell by a similar amount, with the S&P SmallCap 600 down 0.1%.
Volume was running sharply lower vs. the same time Tuesday on both main exchanges. The stock market will be closed Thursday and open until 1 p.m. ET on Friday.
Apple has done very well for long view-minded investors over the past year. As repeatedly noted in IBD’s Stock Market Today column late last year and early in 2017, the iPhone, iPad and digital services titan broke out of a first-stage cup with-handle-base on Jan. 6-9, rising past a 118.12 buy point.
Volume came in a little higher than normal in a few up days over the next three weeks, then gushed higher on Feb. 1 after Apple reported a solid turnaround in quarterly results (fiscal Q4 profit up 2% to $3.36 a share, halting a three-quarter streak of year-over-year losses, and revenue up 3%).
The gain from that first-stage bottoming base has now reached 49% to a new all-time high of 176.24.
Apple has certainly delivered on the fundamentals over that period. Growth has accelerated. After that 2% rise in earnings, Apple has posted EPS increases of 11%, 18% and 24% on revenue gains of 5%, 7% and 12%. Growth is expected to continue accelerating.
While no sell signals have triggered for investors who bought on the January breakout or have even larger capital gains, Apple at one point will be vulnerable to a correction, just like the greater market itself. When this occurs, expect the megacap tech to test support at its long-term 200-day moving average, currently near 152.
A big collapse through that 200-day line would likely mean that a significant new base-building period is in the works.
While institutions are clearly bullish about the current fundamentals in Apple, some are expressing concern over the company’s ability to keep raising the cash payout.
Alex Crooke, head of global equity and income strategies at Janus Henderson, notes that Apple likely has had to raise debt in order to pay the dividend since the company is not making any move to repatriate profits from overseas businesses. Indeed, long-term debt vs. shareholder equity has gone up to a still manageable 73% in FY 2017 (ended in September) vs. 45% in FY 2015.
“The margins might stay up, but the (dividend and profit) growth rate may moderate,” Crooke told IBD, adding that he sees some limitations in the volume sales for the latest iPhone X, which can cost more than $1,000 per handset.
Crooke manages the Bankers Investment Trust, a closed-end fund started in 1888 and currently traded on the London Stock Exchange. The fund is on track to achieve 51 years in a row of increasing dividends paid to fund holders.
Apple paid a quarterly cash dividend of 63 cents a share on Nov. 16. The stock has a 1.5% annualized yield, below the 1.9% yield for the S&P 500.
Going back to Meridian, the handle in Meridian’s base began with a decline on Oct. 27, and the 7.2% correction within the handle portion is normal for a good cup with handle pattern.
The operator of savings and loans in three counties of Massachusetts boasts a top-notch 99 Earnings Per Share Rating in IBD Stock Checkup. Earnings per share have risen 64%, 69%, 29%, 100% and 39% vs. year-ago levels in the past five quarters.
BofA is in the proper buy zone since clearing a 25.90 buy point in a seven-month-long flat base.
JPMorgan, at 98.82, has climbed modestly since clearing a 95.32 base-on-base buy point in late September.
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