Buffett says the stock market, over the long run, is a weighing machine. You eventually get the price a company's business justifies.
Over the short run, what you get is ... well, if we knew that we wouldn't need jobs, would we? Sometimes, what you get is the result of structural features of the marketplace rather than a result of features of the company whose shares you're following.
Apple's share of notebooks in North America were announced to be up from 6.6% of all notebook sales to 10.6% of all notebook sales. Apple gained 60% in share over last year while its largest competitors either experienced tiny fractional changes, or lost share.
Meanwhile Apple's share price dropped over 8% to under $130.
Since Apple hasn't had a subprime scandal or a big accounting scandal just recently, and has over $22 a share in cash, it's a company in which cash-crunched traders might actually still have some equity after subsequent hits in Freddie Mac and Fannie Mae takeovers on the federal nickel, the Lehman bankruptcy, Merrill Lynch's buyout by Bank of America, the failure of Bear Stearns, and so on. Why does that matter? Facing a margin call, people need to raise money from where the money is, and can't rewind the tape to get it out of losing investments before the fact. In other words, suffering traders (or liquidating brokers settling up a margin call) may see Apple holdings as a place to raise funds.
The fact that Apple hasn't cracked double digits in Europe/Middle East/Africa and has little business in China or South America means that, though it's growing out of a niche, it's still got someplace left to grow. Apple will be continuing to grow profits in anticipation of a day that liquidity isn't so constrained that there's too little buyers' interest to raise share prices on news like 60% growth.
As share prices fall while the news and outlook improves for Apple, one might not be blamed for thinking there's a bargain in the making.
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