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Now You're Hearing Apple Roar: Market Recon

"Chess is mental torture." -- Garry Kasparov

Cupertino, We Have Liftoff Consensus expectations were for $1.57. The "whisper" number was $1.61. The fear on the street was that we would see something of a cosmetic beat that would fall short of the whisper, sparking an overnight selloff. Survey says, no way. Have you ever heard an apple roar? Maybe not, but now you've heard Apple (AAPL) roar. The shares of this Action Alerts PLUS portfolio holding were trading with a $148 handle with little more than half an hour left until the final bell tolled at 11 Wall Street. Somebody knew something, or maybe some of the shorts got scared. For good measure. The stock price ran more than a dollar to reach levels above $150. Then that bell went off. Pencils down, students.

The firm beat on both the top and the bottom lines. It wasn't close. It was pretty. A 10-cent beat for EPS, and a beat on revenue that swelled to more than half a billion dollars, revenue that climbed more than 7% year over year. Corporate performance is good this quarter overall, averaging revenue growth of over 5%, but 7%? The stock traded at $153 late last week. Why stop there? It is trading above 159 in the wee hours of Wednesday morning. Everyone say "Nice job, Tim Cook". I was a doubter. I own the shares, without really liking the products all that much. Remember during the roundtable at The Street yesterday, when I mentioned Apple services? That one slice of their business is why I am invested in the name. We were hoping for growth of 18%. That business line showed growth of 22%. The iPad and iPhone business lines grew, but in a far more pedestrian way. Let's not forget that this is still ahead of what some see as the iPhone 8 super-cycle. "Huzzah", says the crowd. The firm guided revenue for its fiscal fourth quarter (this was the third quarter) to a range between $49 billion and $52 billion. That is versus original expectations for $49.21 billion. Whoa. Is that all? Not really, shipments grew by great measure. I do not really judge shipments until they turn into revenue, but back to revenue, how about those cash levels?

Apple's cash level increased by $4.7 billion to $261.5 billion, despite paying dividends of $3.4 billion and buying back $4.5 billion worth of the company's shares. If run to completion, and target date, the firm's buyback program still has to buy a rough $77 billion worth of its own shares over the next seven quarters. Hmmm. Now imagine tax reform that allows a cash repatriation holiday at a greatly reduced rate. Hmmm. Nearly all of Apple's cash is held overseas. Hmmm. I have no intention of selling this name.

A Brand New Car?

July auto sales appeared rather ugly as the numbers rolled out from the manufacturers on Tuesday. General Motors (GM) sales were down 15% year over year. Ford Motor (F) -7.4%, Fiat Chrysler (FCAU) -10%. In each and every case, a miss versus estimates. Industry-wide. A 7% drop from a year earlier. Still, the aggregate number came in at an annualized 16.7 million units, down from 16.8 million in June. The problems for...