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The One Investing Lesson You Can Learn From Apple AND RadioShack

InvestorPlace logo InvestorPlace 9/16/2014 James Brumley

What do Apple (AAPL) and RadioShack (RSH) have in common?

apple The One Investing Lesson You Can Learn From Apple AND RadioShack© Provided by Investorplace On the surface … well, not a lot. AAPL is sitting on top of the world in the wake of its newly unveiled iPhone, while owning RSH stock comes with a threat of bankruptcy at any moment.

But there is one common thread between RadioShack stock and Apple stock at this time, and it’s something all investors will want to remember no matter whether they own one, the other, both or neither.

AAPL & RSH Stock – Different, But the Same

There’s no two ways about it. AAPL — up 55% over the past 12 months — easily qualifies as one of the market’s hottest stocks right now.

And why not? Just last week, Apple announced a trio of products that are sure to please even the pickiest of consumers. One of them is the iPhone 6, of course. Another was the long-anticipated Apple Watch. The proverbial cherry on top was Apple Pay — a technology that turns an iPhone into a digital wallet.

So why has AAPL failed in the meantime to move beyond the intraday peak it hit on the day the Apple event was hosted? After all, the company has released obviously the best salvo of news it has mustered in months.

Because Apple doled out the reward leading up to the event rather than responding to the event. Those who waited to see the quality and caliber of the new product line waited too long to move.

Then there’s RadioShack.

RSH stock has lost more than three-quarters of its value over the past 12 months as the bankruptcy monster reared its ugly head again. While CEO Joseph Magnacca is working to steer the company through a turnaround effort, the rest of the market isn’t as hopeful RadioShack won’t run out of cash before it can start to get traction again.

So why did RSH stock soar more than 150% in late August?

Traders loved the news that an institutional shareholder might be willing to fork over $25 million to the company before it ran out of cash. Funny thing about that rally, however — most of the gain has been given back as more and more investors recognized that even with a $25 million cash injection, RadioShack as we know it today is almost certainly destined for Chapter 11; even the most optimistic of backers aren’t interested in throwing away good money after bad.

It was a brilliant, even if inexplicable, four-day rally though.

A stock with a great story that doesn’t budge on good news, but rallies for months — on nothing but hope — leading up to a major news event?

Another stock with no reason to inspire hope makes a triple-digit gain on good news that won’t actually fix the underlying problem?

Welcome to the stock market.

Reality

It’s something veteran traders know all too well: Sometimes, stocks don’t make sense. Sometimes, a stock disconnects from the underlying company’s value and becomes an entity of its own, serving no other purpose than to give traders a chance to outguess other traders.

Said differently, right now, AAPL and RSH stock are legalized ways for traders to bet on how other traders are going to feel about either of those two stocks anywhere from five minutes to two years in the future.

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