Patience has paid off.  In my recent article Apple is selling below Intrinsic Value, so now we wait on the Margin of Safety,  I calculated Apple’s Intrinsic Value at $566, with a ‘Margin of Safety’ Buy price of $424.50

Yesterday Apple stock fell below $424.50 and provided an opportunity to enter.  The stock has been declining in value ever since its record high of $705 per share in September. Within the past six months, shares of Apple Inc. (NASDAQ:AAPL) have fallen more than 37 percent.  Anyone suggesting in September (or December as I did) that Apple was overpriced was thought crazy.  But as Ben Graham said, “In the short run market is a voting machine, but in the long run it is a weighing machine.”

When I ‘weighed’ Apples intrinsic value I found it to be far less than what the market was offering.  Fortunately I didn’t have to wait too long either.  I now own a wonderful company at what I believe is a very fair price.

I’m also very happy to join hedge fund manager David Einhorn as an Apple stockholder.  He’s been active lately with ideas about how Apple can enrich shareholders:  Hedge Funder David Einhorn Presents A Plan To Make Apple Investors Hundreds Of Billions Of Dollars.

Using the The Kelly Formula for Stock Investing: Growth-Optimized Money Management Excel spreadsheet, I gave Apple a 5% share in my portfolio.

Normally I use Trend Exhaustion Market Timing Excel Spreadsheet and look for short-term weakness in a stock I am purchasing.  AAPL is not triggering a signal as yet but I could not resist purchasing when I had the opportunity.

A few things that worry me:

Apple is a tech stock.  Technology and consumer behavior changes quickly so estimating the future cash flows for any tech stock is risky business.  That’s why Warren Buffet avoids them.  For myself I’ve had bad luck recently with tech stocks (ie. HPQ and MANT).  HPQ in part has been a victim of Apple’s success.  But I believe Apple has the staying power to continue to innovate and generate plenty of value for shareholders.