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With Apple breaking a new record high for 7 consecutive days, and earnings for AAPL slated for Wednesday,  Oct 30th, James McDonald, CEO & CIO of Hercules Investments, a Los Angeles based Registered Investment Advisor, is out with new research on how Apple Shareholders are at a very high risk of losing their profits and seeing their overall portfolios potentially decimated. There are two conclusions of James’ research:

  1. Apple stock declines much more than other big stocks when markets weaken and because many Apple shareholders count on it for the bulk of their portfolio’s total gains Apple shareholders risk losing much more than non-Apple shareholders.
  2. With active risk hedging Apple shareholders can protect their Apple profits and dramatically reduce the chance that their overall portfolio profits get nearly wiped out in the event of a market correction.

We’ve included a number of slides below that lay out James’ research, but some of the key bullet points include —

  • AAPL success has caused many portfolios to be severely over-weighted by it
  • AAPL’s share price falls much further than other “S&P Giants” during market pullbacks
  • AAPL shareholders are at a significant risk of potentially catastrophic portfolio losses
  • Inexpensive risk hedging can prevent catastrophic losses and provide peace of mind for long term AAPL shareholders

Some further info that is not in the research but about James and his AAPL experience —

  • James has executed around $530 million in options and futures hedges total
  • James has executed around $40 million in AAPL specific hedges total
  • The typical cost of the hedge is 15% of the value of the AAPL stock.  So it will take $150,000 to purchases hedges that will protect $1mm
  • The “best time” to put any hedge on is “sooner” versus “later”, the nature of the strategy is protection first.

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