AAPL weakness and a new short idea to put on the list

Apple’s down again this morning and I’m not liking the trading action in that stock much at all now. There’s a relentless selling pressure that’s weighing down on the stock and the stock’s faded $20 since the pop after earnings. In some sense, I think the biggest culprit and reason for the selling is that we went right back to the “AAPL is safe!” herd mentality as soon as the company delivered those strong earnings. I think we need to let the weakhanded bulls and fearful new longs finish this new puking cycle before looking to add to the AAPL. Patience rules again.

Let me comment really quickly on the big investment in Barnes & Noble by Microsoft which valued the B&N Nook tablet/e-reader business at $1.7 billion. For the record, when Microsoft invested in Facebook at a $15 billion, I told my viewers on my TV show that it was a brilliant investment. This is not a brilliant use of money. The Nook, which is currently having some modicum of success and showing nice growth but is far from profitable, is based on the Android operating system. Google’s Android operating system.

I predict that over the course of the next two years that we’ll see Microsoft convince the Nook guys to try a hybrid Android/Windows operating system or that they’ll convince the Nook guys to ditch Android entirely for Microsoft’s Windows 8 for tablets. The upshot is that you can expect Barnes & Noble and the Nook to face the same future that Nokia has suffered since they bet on Microsoft — slow death.

If you’re an investor in Barnes & Noble BKS, I’d take today’s gift and run. The Nook is now doomed, not saved, by Microsoft’s investment.

And I’ve now put BKS on my “Short this sucker when it cracks next time” list. Because I think we’ll see BKS top out somewhere here in the mid $20s and that it’s likely a single digit stock by the end of next year.

The Nook was never going to be an iPad killer. It might have had a chance for some continued success and even some profitability for the mid-term. But Barnes & Noble isn’t building an eco-system for their Nook and it’s going to take an smartphone/tablet eco-system combination to win in the next generation of operating system wars. Have you used the Windows smartphone app store? Do you know what it’s called? Are you sure that it’s got any apps besides Twitter and Facebook? That’s my point.

I’ve been saying for three years now that the big winners in this new tech front are Apple and Google.  The only thing that changed in that analysis with today’s news of Microsoft’s investment in Barnes & Noble’s Nook business is that the Nook is…well, nothing except a new trading idea in shorting BKS when it settles down from this news.