Fundamentally, I agree with your assessment, except for two nagging concerns, one each for CPQ and AAPL.
On the CPQ side, the concern is the merger with DEC. I don't know if CPQ can manage that well, and the first time it stumbles a little CPQ is likely to be creamed. I bought Dal-Tile (DTL) after it acquired Armstrong's ceramic tile division, because the resulting company would be absolutely dominant in a growth industry. But DTL couldn't manage the deal. Inventory control, consolidation of branches, and administrative tasks overwhelmed the management, and the stock fell badly as the problems were announced and blamed for poor performance. A few months ago, Armstrong bought its tile business back. I can see the same thing happening here with DEC and CPQ, although I have no basis for that at all; I don't know either company's management.
On the AAPL side, from personal experience, my opinion of Steve Jobs' management and product strategy capability is very low, but the man is one of the luckiest alive. It would not surprise me at all for him to announce some incredible alignment (like Pixar's Disney Toy Story deal) that would light a booster under the stock.
Technically, your idea looks good. AAPL's chart suggests a significant pullback, and CPQ's suggests a recovery.
I'm not very bullish these days, so I am having trouble finding good longs, although I think GLW is way oversold so I bought some.
I still like the BKS/AMZN hedge, although it would have been disastrous when I first suggested it. Fortunately no AMZN stock was available for shorting, and there still is none available. AMZN's latest report to the SEC says it expects to continue losing money "indefinitely". And it was up 10% this morning. |
