Review: Apple Grows EPS By 40%

Stocks Were Up, Ending Their Best Month Since January

The end of the month can be a curious time because there is occasional window dressing where fund managers try to make their portfolio look good for their investors. The action on Tuesday was fairly normal. July ended up being the best month since January as the S&P 500 was up 3.6%. The S&P 500 is up 5.34% year to date which is great performance, but it still feels like the market is down because it is below its record high. With Apple’s solid result, which I will discuss in this article, the big tech names don’t look too bad overall. There should be enough leadership to carry the market to a record in August. As for the near term, the CNN Fear and Greed index is once again showing the market is overbought as it is at 66 out of 100. I am not confident the market will hit a record high without a small pullback of 3%-5%.

Leadership Is Everything

On Tuesday, the S&P 500 was up 0.49%, the Nasdaq was up 0.55%, and the Russell 2000 was up 1.07%. It is easier for Apple to power gains than the other momentum names because it is larger. It’s also in the Dow. The reason I focus on the leadership is because it drives returns. As you can see in the chart below, the best 20% of all stocks accounted for all the gains from 1989 to 2015. As you can see, we aren’t in unusual times. This isn’t a tech bubble because the biggest tech firms are driving markets. To be clear, it’s fair to be bearish on some of the tech names. However, they aren’t bubble because of their enormous profit and revenue growth.

(Click on image to enlarge)

Apple Beats Estimates

Yesterday, Apple reported a great quarter as it beat EPS and revenue estimates. The only weak point was the miss in iPhone shipments, but that was made up by the increase in the average selling price of the devices. This led Apple stock to go up 4.03% in the after hours session on Tuesday. It needs to go up 6% to reach a $1 trillion market cap. It will be the first to reach that milestone like I expected.

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