Low Hanging Fruit

The market is a funny beast.

This week Apple released amazing results with revenue growth of 60% to name just one highlight. The market's reaction was "whatever!"

Then eBay released a decidedly average forecast and the market's reaction was to jump up 6%.

I know it is all about how the results match expectations but surely anyone can see that Apple is cheap at these levels?

The fact that AAPL shares have increased 500% over the last 5 years perhaps makes people think that they have already missed the ride. But could it be that the ride is just reaching top speed?

Let's assume that Apple earns $20 per share over the next 12 months. Then subtract the cash and securities mountain of $50 per share from the share price to get an "enterprise" price of $210.

What's this? A forward PE of about 10? For this global monster which could be eating Microsoft's enormous PC market share for years to come?

The AAPL results are so good that the executives seem to be doing their best to underplay them. For example they are not bothering to give a non-GAAP EPS (which I calculated at about $3.85) or highlight the huge difference between income and cash flow ($3.25 B compared to $4.8 B.)

Should I sell my EBAY shares and buy more AAPL? Maybe but I am trying to resist the urge to trade. When I bought EBAY at $44 per share about 5 years ago I thought I was getting a once-in-a-lifetime opportunity. And then the EPS growth disappeared and the share price plummeted.

I can't see this happening to Apple but I could be wrong. However if you are looking for a risk / reward ratio that is crazily balanced in your favour look no further than AAPL at these levels.