kungfuguo

AAPL / GOOG, Monthly Analysis 8/25/2013

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Here is a chart looking at monthly prices of GOOG             and AAPL             .

Its a fact that money from one investment can flow easily to fuel another. People / firms that invest / trade in AAPL             also have similar interest in Goog             , FB             , TSLA             , and MSFT             , just to name a few. Looking at price ratio can tell us direction of money flow , and help us understand where we are headed to.

Here I charted the price ratio of AAPL             / GOOG             .

From an area of relative flatness (Stage 1), where AAPL             was trading around $300 (11/1/2010 - 12/1/2011) and Goog             trading between $500-$600, I derived a equilibrium ratio of 0.64. Anything significantly above it would suggest money flow into AAPL             , and vice versa when significantly below it.

The success of iPhone and iPad bought significant flow into AAPL             (Stage 2), but not quit at the expenses of Goog             . The In Stage 4, we see sell of AAPL             , and money seems to flow into Goog             . The AAPL/Goog ratio bottoms out to 0.4.

Currently, I believe that we are back in Stage 1. The ratio is now 0.58. We are heading back to equilibrium ratio (0.64). I expect that AAPL             will continue to go up, and at some point, Goog             will start coming down, moving us to Stage 2.

Let's keep watching.
kungfuguo
3 years ago
Further observation / Analysis: Stage 2 is an interesting area. In the early stage 2, I think it represents entrance of "smart money," i.e. hedge funds and funds managers who do not own Goog. Hence we see inflow of cash to AAPL without significant drop in Goog stock prices. As more fund managers caught on, they start to sell Goog to buy more Aapl (later stage 2), and hence we see a drop in Goog stock price. As we approach stage 3, some funds start to exit AAPL and re-enter Goog, hence we see a short equilibrium.
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