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Apple bulls may not like this. Widely followed investor Doug Kass sees similarities between Apple and Microsoft in 2004.Here’s the thought process.“I viewed the Apple capital allocation as Microsoft redux – if you go back to July 2004 you can use Microsoft as a template for Apple,” says the Seabreeze president and CNBC Contributor.
“It’s another a large cap tech company – admittedly not with the stellar growth prospects as Apple – but it too was flush with cash. And they did a $75 billion capital move – which is far greater than Apple’s – doubled the cash dividend, announced a $13 billion stock buy back."You'd think that would drive shares higher over the next few weeks, right? Not so.
In 2004, Microsoft shot higher only to drop steadily for the next 2 weeks. “It gapped higher to $29.5 but then, two weeks later, it was back down to $27,” Kass explains. That's about an 8% decline.
If Kass is right, Apple could trade down to around $550 in a fortnight.
And Kass is putting his money, where his mouth is. “I shorted the stock around $605 and covered some at $583 – but I’m still short,” he says.
* Kass is also president of Seabreeze Partners and a contributor to the Street.com, Jim Cramer’s Real Money Pro web site.-------------------------------------------------------------
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