4 Stocks NOT Correlated to Apple

Chris is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Michael Jordan was the heart of the Chicago Bulls offense.  He led the Bulls to six National Championships.

Yet even Michael Jordan needed to take a breather during most games.

That’s why I’m not overly concerned with Apple’s (NASDAQ: AAPL) major sell off.  For many investors, Apple’s torrid growth has left their once-balanced portfolios brimming with gains – and also a large weight towards Apple stock.

The problem with unbalanced portfolios tilted towards Apple is that when Apple tanks, the portfolio follows.  In the long-run, I have no doubt that Apple will make a move upwards.  Perhaps it will even surpass its high of $705.07. 

But for now, Apple sits at $514, 27.1% below its high.  Likely, most of the damage is done.  However, you may not think that most of the damage is done.  If so, what’s next is for you.

Correlation Analysis

Correlation tracks how two securities move in tandem.  A perfect “1” means that both move in lockstep, while “-1” means they move inversely.  I ran a correlation analysis and found four tech stocks that are were negatively correlated to Apple during the last 50 trading days.

If you are long Apple and want a reprieve through hedging or diversifying (but don’t want to sell all of your shares), consider one of these tech alternatives.

Research in Motion (NASDAQ: BBRY)Correlation: -.67

Observe a word of caution with RIM.  RIM had a great run during the past few months, popping 128.5% to $14.21 from its September 24 low of $6.22.  However, on December 21 the stock gapped down to $11.84 on the open and currently trades between $11 and $12.  The run may be over.

In addition, RIM fell from prominence.  The company was the first to make accessing e-mail via phone an easy feat.  And its keyboard is still simple to use.  However, its clunky browser and outdated platform have made Blackberry’s severely “uncool.” 

The data backs this up.  In my article “Blackberry’s New Design Will Save the Stock” I wrote about Nokia’s miserly 2.1% worldwide market share last quarter.

On the bright side, BlackBerry is launching new designs.  No doubt the anticipation “saved” the stock price.  Just look at the past three months.  However, be wary that the long-term may not be as rosy as the immediate past.

Nokia (NYSE: NOK)Correlation: -.61

Nokia has been on a tear.  The stock was recently up above $4 after trading as low as $1.63 in July.  Nokia’s rich patent portfolio and strong market share have enabled the company to weather the storm.

Last quarter Nokia had 19.2% worldwide market share, behind Samsung’s 22.9% market share.  One year prior, Nokia had 23.9% share in the quarter, meaning that users jumped ship to Apple or Android.

The future looks much better.  Nokia’s new Lumia phones are carried by the major U.S. carriers, and they run users just $99 – a great price for Microsoft’s new Windows 8 operating system.

Netflix (NASDAQ: NFLX) Correlation: -.85

Thank you, Carl Icahn.  I wrote about Carl Icahn’s investment in my article “Icahn Has Special Plans for Netflix.”  In the post I explained that Icahn owns shares at an average price of $58, and that he believes the company is severely undervalued.

Investors should have the same mindset.  While Netflix would have a hard time raising prices because of its price fiasco last year, Netflix can certainly grow by adding users.  Whether the shares increase because of growth or via acquisition, Netflix is a valuable media property with upside.

Facebook (NASDAQ: FB) Correlation: -.59

After bouncing around the $19 area for some time, Facebook ran up above $28.  Currently the stock price is settling in the $26 area. 

Facebook’s Instagram is making headlines now because it tweaked its Terms of Service.  Instagram is making changes that Facebook hopes will lead towards profitability.  Recently Instagram “disabled a feature that allowed its users to post their photos directly into Twitter,” said The Wall Street Journal.  This means more market share for Instagram (Facebook) and less for Twitter.

Instagram reached 7.3 million active daily users this past August, beating Twitter’s 6.87 million for the first time.  If Instagram is able to profitably monetize through ads, the company’s huge market share then becomes a significant boost to Facebook.

Conclusion

Yes, Apple is falling further each day.  If you think that Apple is poised for a rebound right now, then hold on and wait it out.  Now is not the time to make major changes.

But if you think that Apple has more downside, then it could make sense to hedge or diversify with other tech stocks.  And the ones above are negatively correlated to Apple.  When Apple zigs downward, they zag upward. 


ChrisMarasco has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple, Facebook, and Netflix and has the following options: long JAN 2014 $20.00 calls on Facebook. Motley Fool newsletter services recommend Apple, Facebook, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus

Compare Brokers

Fool Disclosure