Buying Steve Jobs

10/28/04 09:32:13 AM

by Koos van der Merwe

Steve Jobs is CEO of Apple Computer Systems, and also CEO of Pixar, the animation studio that created Toy Story, A Bug's Life, Toy Story 2, and Finding Nemo. His business life currently is success incarnate, a Midas with the golden touch. So how do you buy Steve Jobs?

Security: AAPL, PIXR
Position: Hold

You buy Steve Jobs through Apple Computer (AAPL) and Pixar (PIXR), both listed on Nasdaq. The question is, would you buy him today? Let's look at both daily charts.

Apple Computers:
Apple's share price fell as all technology shares did, from a high of $65 in April 2000, bottoming in December of that year at $13. From that date the price traded in a range, reaching a high of $27, back to $15, rising to retest the $27 top, and eventually falling to $12 in April 2003. Then came the I-Pod.

For readers who do not know what the I-Pod is, I would suggest checking online and discovering one of the most beautiful and clever ideas since the debut of the original Apple computer. Steve Jobs is without doubt innovation personified.

The daily chart of Apple (Figure 1) shows how the price rose as the support lines A, B, and C had to be continually redrawn with the rise in the stock's price. A long-term holder would have bought and held this stock as the price moved higher, while a short-term trader could have used the JM internal band, as shown on the chart, with buy and sell signals highlighted. With Apple, the JM band is a 15-period moving average offset by 3% and -3%.

What now? Apple's sudden rise to $48.53 on a gap is a concern, as prices tend to fall to fill the gap. This was confirmed by the RSI, which is oversold. We could therefore take profits and wait for a fall to test the JM band before buying again.

But then there is Steve Jobs ... and he and his team dreams up new ideas far quicker than the market reacts. Even as I write this, he has announced the release of two new products, moving the price of Apple shares up, making a fall less than certain.

Figure 1: Apple Computer

Graphic provided by: AdvancedGET.

Pixar, weekly chart:
With Pixar, you can see how the share price moved up strongly from $12.48 to $66.51 with the release of its blockbuster films--films that most children have seen and purchased copies of. When the bubble burst, the price did fall to $25.73, giving an astute investor the opportunity to "buy Steve Jobs" once again. At the current price of $80, it was well worth the risk.

Should we continue to buy Steve Jobs? Definitely, but wait for a retracement, if and when one occurs. Stock prices for both companies are high, but with Steve Jobs' agile and inventive mind, it appears that there is no ceiling to the prices of companies he controls.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.