How to "Play" the Apple TV: Buy AAPL on the Rumor, Sell on the News

Steve McDonald
by Steve McDonald, Bond Strategist, The Oxford Club

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In focus today: Apple TV is coming, but no one knows what it is, timber’s time has come and the SITFA

How to "Play" the Apple TV

Apple is so hot the options exchange had to change the rules governing buying AAPL options. The buying has been huge and most of it bullish, according to Barron’s.

In fact, AAPL options are the most actively traded options on the whole exchange, and dealers are having trouble keeping up with all the activity.

All of this, according to the Barron’s article, is due to the anticipated announcement of the new iPhone this September.

But wait, Apple TV is right behind the new iPhone announcement, but nobody seems to have a handle on what it is exactly.

The best source I know of, Toni Sacconaghi of Sanford Bernstein, says it will be a set top box, not a whole new TV, a box that interfaces with the existing cable providers. Most analysts feel trying to break into a market as saturated as TV boxes would be foolish and over the top.

Sacconaghi says if it plays out this way, it will not be the big bang everyone has come to expect from AAPL, but rather a slower development process.

But knowing how AAPL does things, I wouldn’t expect too much of a muffled debut. This is the company that set the world on its ear with the iPad, iPhone, you name it. Expect more of the same.

Look for APPL to make a real dent in the TV/cable industry and for its share to grow steadily.

In the meantime, we’ll have to be content with the most active options and the largest market cap company in history.

Keep an ear to the ground for the Apple TV rumors. As always, buy AAPL on the rumor, sell on the news.

Next Up, Timber’s Day Has Arrived

The recovery in the homebuilders has sparked a big run-up in lumber prices, and the Journal says it’s just the beginning.

Take Weyerhaeuser, symbol WY. It’s at its 52-week high and its PE seems to indicate it’s overpriced at 29 times until you consider its estimates are based on trough numbers. It’s currently worth less than one third of its 2007 high.

Todd Lowenstein, of High Mark Capital Management, says that owning WY is a huge asset play that has been significantly undervalued at the bottom of the cycle.

Analysts are looking for a double-digit increase in earnings this year and, considering the fact that WY makes 84% of its revenue from homebuilders, they’re building significant momentum on the big turnaround there.

The CEO of WY was quoted in a Barron’s article as saying that the recovery in housing is real and although it’s not a V shaped recovery, it is a recovery.

The other names mentioned in the Barron’s article were Plum Creek, Rayonier and Potlatch.

Of course, if you’re a regular viewer of this spot, you would have been able to buy WY almost at its 52-week low when I talked about the opportunities in the lumber industry and homebuilders in a segment I did here last year.

Timber, this one has to be on your boogie board.

And, of course, the SITFA

This week it goes to a little understood industry that many count on to maintain their swimming pool.

That’s right, the pool cleaning business.

The former VP of Yahoo’s publisher network, Willan Johnson, saw an opportunity in the pool cleaning business and launched a high tech version of what they call the “one guy with a pole and a truck” business, which, according Johnson, is what makes up almost all of the business.

In a CNBC article, Johnson listed 10 truths about pool cleaners, and the number one was that they’re usually the first to know if you’re having an affair.

According to Johnson, unlike anyone else who has access to your home, the backyard has no key or doorbell, so they walk in on many compromising situations. No chance to say, just a minute when the doorbell rings.

Skinny-dipping is another really big one.

So, if you’re trying to hide an affair from your spouse, Johnson advises cleaning your own pool.

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