Don’t get between a TV camera and Carl Icahn on a day like today. He will run you right down.
Luckily, Icahn ran Apple (AAPL) shares higher on an otherwise rough day for the stock market. The man knows how to get attention.
Media stories usually describe Carl Icahn as a “corporate raider“ or “activist investor.“ I think “media manipulator“ might be more accurate.
He doesn’t just play Twitter like a flute; Icahn delivers an orchestrated multimedia symphony. Today’s selection actually began in Twitter late Wednesday afternoon. It looked like this.
That set off a coast-to-coast wave of guessing games from analysts. What would Icahn say to Apple? Traders bid up shares of other Icahn favorites like eBay (EBAY) and Netflix (NFLX), thinking he might urge Apple to buy them.
Icahn had a different plan. He tweeted again before markets opened this morning.
The link led to the Tumblr blogging site and this rhapsodic headline:
The letter is a long, detailed financial analysis of all Apple’s business units. Icahn calculates that fair value for AAPL shares is $203 right now. That’s double the stock’s current price near $100.
In Icahn’s view, AAPL shares are undervalued because the company is holding so much cash on its books. My own valuation estimate is much lower than Icahn’s, but it doesn’t include the kind of growth estimates he believes are reasonable.
Icahn wants Apple to again increase its buyback program by $100 billion and unlock some of this value. Will Apple give Icahn what he wants? Probably not — but they will give him something.
Leaving nothing to chance, Icahn made the rounds of financial TV networks the afternoon. He appeared successively on CNBC, Bloomberg Television, and Fox Business Channel to spread his bullish Apple forecast.
The conversation turned to other subjects as well. On CNBC, they asked him about his feud with EBAY board member Marc Andreeson. The two engaged in some mudslinging earlier this year but seemed to have smoked the peace pipe.
However, apparently the feud is back on. Andreeson attacked Icahn on TV yesterday and Icahn fired back today. I think they both sounded rather juvenile, so I won’t reprint their words here. Follow this linkif you want to read them.
Apple has a couple of important dates on the horizon. They’ve scheduled a media event to unveil new products on Oct. 16, and will release quarterly earnings on Oct. 20.
If you go back and look at seasonal patterns for AAPL shares, they tend to perform very strongly in October/November trading. Even without Icahn’s help, the stock is entering a favorable period.
And if that weren’t enough … traders have HUGE short positions in Apple. The stock is set up to undergo a major “short squeeze“ that could drive it substantially higher.
Apple’s all-time peak intraday peak was $103.74 on Sept. 2 of this year. I think the stock has an excellent chance of breaking above that price and moving to $110 or more in the next few weeks.
I was dubious to such a move being possible just a couple of weeks ago, but now I think Icahn can give Apple the boost it needs.
In the process, Icahn will give himself a nice boost. He owns 53 million Apple shares. Today, they are easily worth $120 million more than they were Tuesday afternoon. Not bad for a couple of day’s work.
By the way, I am following Apple closely for Cash Flow Kings subscribers. We still have a special $1 introductory offer. Click here to check it out.
Apple was one of the few hiding places in another ugly trading session. Yesterday’s Federal Reserve minutes seem to have changed the prevailing narrative.
Instead of cautious optimism for the economy, traders suddenly want to focus on the Fed’s global weakness comments. European Central Bank President Mario Draghi added fuel to the fire overnight by warning that Europe’s economy is slowing.
Draghi says the Continent’s leaders must lift inflation from its “excessively low“ level. Weak data that suggested Germany could enter recession sealed the deal. Stocks opened to the downside in U.S. trading and got worse as the day wore on.
The economic-weakness theme was negative for energy prices. Brent North Sea crude dropped below $90 for the first time in two years, while the U.S. spot WTI contract went as low as $85.02.
Here are more of the day’s highlights.
- Few sectors were untouched in today’s selling. Worse, the ping-pong volatility is driving both bulls and bears to the sidelines in many segments.
- Federal Reserve vice chair Stanley Fischer, the Yoda of central bankers, said today that markets are probably right to expect higher interest rates in mid-2015.
- Fischer added what may be the clearest statement ever made by a Fed official: “If the data come in differently, we will say different things. It’s not complicated.“
- Gold prices rose in an otherwise rough session for commodities. With traders now thinking more central bank stimulus is likely, some still want and inflation hedge.
- The energy complex had a very rough day. Aside from oil prices, natural gas and coal retreated amid signs of slower economic growth.
- Coal is economically sensitive because it fuels many steel mills. Cliff’s Natural Resources (CLF), the largest U.S. coal producer, dropped 7.3% today.
- Ebola fear isn’t going away. Travel stocks are still declining, particularly airlines and cruise lines.
- Earnings season got off to a good start with a beat from Alcoa (AA) yesterday afternoon, but any bullish influence was gone by the open this morning.
Good Luck and Happy Investing,
Uncommon Wisdom Daily