Did Goldman Sachs Call the Bottom in Apple Shares?

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Goldman Sachs Group Inc. (NYSE: GS) is generally deemed by Main Street and Wall St. to have some of the most influential analysts on Wall St. So what is an investor supposed to think when Apple Inc. (NASDAQ: AAPL) manages to close up marginally when Goldman Sachs removed the troubled technology giant from the prized Conviction Buy List? It is also worth noting that the price target was downgraded to $575 per share, versus a prior target of $600.

The news had shares lower on Tuesday morning as low as $426.40, versus the closing bell price of $428.91 on Monday. Shares actually went as high as $438.14 today, but the stock closed up only $0.88 at $428.79. What is so interesting here is that Apple was back up to $470 just last week and then it sold off all over again even as the stock market was hitting new all-time highs.

With the stock down close to 40% from its all-time high and with the drop of about 16% so far in 2013, we would ask investors to please watch this stock closely. Apple seems to have no new catalysts and we have seen analysts downgrade the stock or lower their price target objectives all the way down.

Until the last analyst downgrades Apple, the true bottom might not be in. The lessons from the tech bubble imploding in 2000 to 2001 does offer lessons here, even if Apple is somewhat different in that it has a great balance sheet with a mountain of cash and its stock is not expensive on a multiple of earnings. That being said, sometimes the historical patterns just matter more than the fundamentals.

We would have certainly expected that Apple would trade lower on the news that Goldman Sachs removed it from the prized Conviction Buy List. That being said, there is an old rule of thumb that can sometimes serve investors right. If you think that news is going to drive something down but the price does not drop, then it is likely that it is going higher. The inverse rule holds true as well.

If the bad news did not cause a drop, maybe (just maybe) this is a bottom.