Apple Again The Second Most Valuable Publicly Traded Company in the World

[MTL18]

Originally Posted by Avatar74

DISCLAIMER: [I][COLOR="DarkRed"]
Could it be that Apple slows down later and does become a value investment after the speculators swarm to the next "hot trend"? Perhaps... but it's still overpriced now especially given that my discounted cash flow calculations have to fall sharply due to their new guidance on the next few quarters. I was still basing previous calculations on at least a couple more years of double digit growth, but that having changed means that they're worth even less than I'd calculated just 12 months ago.

To respond to MTL18: I don't believe in timing, and I don't believe that the market is right all of the time. I believe in finding value that exists right now. Apple isn't a value buy at this time so I'm not even entertaining the idea yet (if at all, because I may find a more optimal situation).

"Be greedy when others are fearful, and fearful when others are greedy." - Warren Buffett

I liked reading your post, but was confused by a couple of things. You really believe it is overpriced right now? It earns 45 dollars per share, trades under 440, and offers a 2.65% dividend. I don't get how that is overpriced. They still saw YOY growth in iPhone, iPad, Revenue and EPS. They have projected to have YOY growth for revenue Q2 2013. I completely understand that this growth has dropped off from triple digits or high double digits, but fail to see how it could still be overpriced at 440. I am expecting the institutions to keep shorting it down, but am expected it to rise once this period is over. It feels very very oversold right now, especially because it is giving dividends.

If you are to be greedy when others are fearful, why wouldn't one want to buy right now? People are having a fit over 54.5 billion in revenue for one quarter. And there are still lots of potential for expansion across the world of their two product lines. We also have no idea what they have going for future revenue products. I doubt that many are expecting a product that could sell like the iPhone or iPad, but adding new revenue would certainly boost their case.

I guess what I am trying to say is that if you are waiting for it to fall further before you buy, I understand that (based on institutional selling). But that doesn't mean it is overpriced, it just means that the overselling is not finished yet. Even still, the little guy will have a hard time predicting when the institutions have finished punishing AAPL yet and could easily miss a ride.

[lildimsum7]

Originally Posted by apple-win

Is Apple a dividend stock company or a growth stock company?

If it is a dividend stock company, I would like to see more than two products in its core business. I won't count on two fashion products to bring me for years consistent dividend stream.

This is Apple's strategy to compete with low-cost devices on China market.

http://www.forbes.com/sites/erikamor...plan-in-china/

Can Apple make low price phones for Chinese students instead of offering them installment plan?

It's a growth stock because the market is placing too much emphasis on the trend of earnings, when that doesn't really matter since the trend will always break down. I guess you could call it a dividend stock since it pays dividend, although not much.

[Avatar74]

Originally Posted by MTL18

I liked reading your post, but was confused by a couple of things. You really believe it is overpriced right now? It earns 45 dollars per share, trades under 440, and offers a 2.65% dividend. I don't get how that is overpriced. They still saw YOY growth in iPhone, iPad, Revenue and EPS. They have projected to have YOY growth for revenue Q2 2013. I completely understand that this growth has dropped off from triple digits or high double digits, but fail to see how it could still be overpriced at 440. I am expecting the institutions to keep shorting it down, but am expected it to rise once this period is over. It feels very very oversold right now, especially because it is giving dividends.

What I'm not seeing in your statement above is a methodical, analytical piecing together of those ratios and concepts into a hard price from an M&A perspective. An example would be discounted cash flow analysis. As I've stated before, I tend to use working capital (current assets minus current liabilities) plus several quarters forward projected operating cash flows. This leads to a very conservative estimate of value, but one that I find comforting because it gives me a very large margin of safety.

Some M&A consultants use a triangulation of this metric, total enterprise value and say PEG relative to the industry, but I don't find price to earnings to be a meaningful metric because it tells me only what ridiculous premium everyone else is willing to pay, not what I should want to pay, for the same asset.

At the current time, the operating value of Apple is more than 40 dollars per share below their current market price. Even if it were 40 dollars above, that would only give me roughly 10% margin of safety and that doesn't make me very comfortable.

If you are to be greedy when others are fearful, why wouldn't one want to buy right now? People are having a fit over 54.5 billion in revenue for one quarter. And there are still lots of potential for expansion across the world of their two product lines. We also have no idea what they have going for future revenue products. I doubt that many are expecting a product that could sell like the iPhone or iPad, but adding new revenue would certainly boost their case.

I still think that there's too much attention on Apple and I don't like to make things a complicated guessing game. Everyone is still paying Apple more attention than any other company out there. So I'd rather look where they're not looking... not play timing guessing games on a yet volatile security.

I guess what I am trying to say is that if you are waiting for it to fall further before you buy, I understand that (based on institutional selling). But that doesn't mean it is overpriced, it just means that the overselling is not finished yet. Even still, the little guy will have a hard time predicting when the institutions have finished punishing AAPL yet and could easily miss a ride.

I'm not waiting for it to do anything. I'm not looking at it. It's not the pricing trend, peaks or troughs that are telling me it's overpriced. It could be at a 40 year low and still be overpriced, or it could be at a 52 week high and still be underpriced relative to its operating value, not relative to its historical which is totally meaningless... evidenced especially by the disclaimer that every broker, analyst and money manager puts very clearly in their fine print: "past performance is not an indicator of future returns"... referring to market performance.

Operating performance, on the other hand, is an indicator of present value. I think nothing of what the price might do later, because a company purchased well below their intrinsic value that continues to have strong operating results tends to rise in price later on, whether because speculators eventually catch on after I already got there, or because they're actually experiencing organic growth and the institutional and conservative long term investors give them an uptick proportional to the real growth in operating results.

We can sit here all day and speculate that Apple is underpriced because at some time in the future they might do this or they might do that, but no amount of that is going to appeal to me. In investing, lack of emotion and patience are the two biggest virtues.

If someone else believes otherwise, I'm more than content to let them.... their exuberance or confidence in their decision will not goad me into running along with them. I've found the level of analysis that suits my level of risk aversion and I am comfortable with the result.

"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative." - Benjamin Graham

Four important lessons here in Graham's one statement:
1. thorough analysis - treat it like you would a merger/acquisition. take it seriously. it's your money.
2. safety of principal - minimize risk exposure; every penny lost today is (1+r)^nt future pennies lost.
3. adequate returns - compounded annually produce better results than chasing after high returns.
4. speculation ≠ investing - speculation is like going to the casino, except you're staring at meaningless charts all day and there are no martinis or women.

Notice Graham didn't say "exceptional returns".... I'm ok with that, because I'd rather be crawling along and compounding returns over the long haul, than running, tripping and skinning my knee every five hundred feet.

[Oracle1729]

Originally Posted by FrozenDarkness

Actually, a smart investor understands the difference between a short-term margin compression and long-term revenue decrease. EVERY new apple product, even back to when the original iPhone 4 was released, had compressed margins. that's the state of affairs. You're literally comparing a year that had iPhone 4S at the height of its margins to a quarter that will still have two new products in the market.

Based on your post I was replying to, that all you care about is gross revenue, you're not a smart investor and clearly don't understand the significance or gross revenue or net profit.

and a degenerate example is ... for degenerates. we're not talking about selling at a loss here, we're talking about ramping up production of a new product, which, last time i checked, is what everybody is b#$@ing about

From dictionary.com:
Degenrate
9.
Mathematics . pertaining to a limiting case of a mathematical system that is more symmetrical or simpler in form than the general case.

The fact that you'd rather make dumbass comments to highlight your ignorance just shows that you have no business being anywhere near an intelligent discussion on financial terminology.

[StoneJack]

Originally Posted by Avatar74

DISCLAIMER: While I'm a professional business analyst, I work for a software company and I'm not in any way a money manager, broker or financial advisor. Whatever you read into my responses, your decisions and risks are entirely your own.



But because Apple is already extremely high profile and overpriced by a very large margin, I don't think its a sensible buying opportunity at this time. But I also think it's one of those odd large caps that's beset by so much speculative activity, instead of long term investment, that the idea of being "too big to fail" from a market perspective is bunk.

Could it be that Apple slows down later and does become a value investment after the speculators swarm to the next "hot trend"? Perhaps... but it's still overpriced now especially given that my discounted cash flow calculations have to fall sharply due to their new guidance on the next few quarters.

*Well, thank you very much for the thoughtful posting, based on experience not many of us have. Maybe its best for Apple and for all others to slow down. Samsung already issued warnings and they have a lot less of profits on lot more smartphones than Apple does. Maybe after all, Apple is right in doing what they do best; making good quality products. Becoming a number one public company in the world was never in their interests and draws too much speculation in.. Just do what you do best - I appreciate Cook's answer even more now, after reading your post.

[DaveN]

Originally Posted by samcraig

It's call opting out, using a proxy or several other methods if you really want that privacy...

In case you didn't hear, people who opted out of Google tracking in Safari were tracked anyway because Google circumvented the option. All Google got was a slap on the wrist by the US Federal government. Google is the borg. You will be assimilated...

[AidenShaw]

Originally Posted by DaveN

In case you didn't hear, people who opted out of Google tracking in Safari were tracked anyway because Google circumvented the option. All Google got was a slap on the wrist by the US Federal government. Google is the borg. You will be assimilated...

To be fair - those people had checked the "track me" box in their Google preferences. They had not opted out of "Google tracking", they set a Safari preference for no tracking while having "track me" set in the Google app.

Typically, application inheritance is stronger than OS inheritance - so Google was honoring the user's application settings.

[DaveN]

Originally Posted by AidenShaw

To be fair - those people had checked the "track me" box in their Google preferences. They had not opted out of "Google tracking", they set a Safari preference for no tracking while having "track me" set in the Google app.

Typically, application inheritance is stronger than OS inheritance - so Google was honoring the user's application settings.

I disagree. If a user sets a do not track option in their browser, there is nothing that says an individual application should supersede that. Who is to say that one preference overrules the other? Only the user can do that. To me, it should be that if google wanted to honestly track the user, that they should test the browser to see if tracking was allowed and then if it wasn't but the user wanted google to track them, put up a info box telling the user that they cannot be tracked because of the conflicting preferences. Instead the tracking went like this:

1) The user visits a web page with the google code
2) The google code inserts an 'iframe' which is an invisible frame having 0x0 dimensions.
3) If the person was using Safari, Google inserted an invisible form in the invisible container
4) The user doesn't see the form or fill it out, nevertheless, the Google code "submits" the form automatically as if the user filled it out intentionally. Thus, Safari thinks the user wants that site to track they never entered anything.

This, to me, is an intentional violation of a user's personal choice by Google in order to make their ads more valuable.

[samcraig]

Last I heard - that was taken care of, right?

So like I said - you can opt out.

Originally Posted by DaveN

I disagree. If a user sets a do not track option in their browser, there is nothing that says an individual application should supersede that. Who is to say that one preference overrules the other? Only the user can do that. To me, it should be that if google wanted to honestly track the user, that they should test the browser to see if tracking was allowed and then if it wasn't but the user wanted google to track them, put up a info box telling the user that they cannot be tracked because of the conflicting preferences. Instead the tracking went like this:

1) The user visits a web page with the google code
2) The google code inserts an 'iframe' which is an invisible frame having 0x0 dimensions.
3) If the person was using Safari, Google inserted an invisible form in the invisible container
4) The user doesn't see the form or fill it out, nevertheless, the Google code "submits" the form automatically as if the user filled it out intentionally. Thus, Safari thinks the user wants that site to track they never entered anything.

This, to me, is an intentional violation of a user's personal choice by Google in order to make their ads more valuable.

[DaveN]

Originally Posted by samcraig

Last I heard - that was taken care of, right?

So like I said - you can opt out.

I don't know if it was taken care of or not. Do I trust Google after being caught doing such a backdoor tactic? No. Google makes its money by learning everything it can about individuals, tracking group trends, and selling the information indirectly through their ad products and they have incentive to continue to do so. It is the foundation of their business. I pay dearly for my phone, cable connection, etc. and expect a way to view what I want without being deluged with advertisements.

Sure, maybe it is a dream. But what is wrong with that expectation?

[FrozenDarkness]

Originally Posted by Oracle1729

Based on your post I was replying to, that all you care about is gross revenue, you're not a smart investor and clearly don't understand the significance or gross revenue or net profit.



From dictionary.com:
Degenrate
9.
Mathematics . pertaining to a limiting case of a mathematical system that is more symmetrical or simpler in form than the general case.

The fact that you'd rather make dumbass comments to highlight your ignorance just shows that you have no business being anywhere near an intelligent discussion on financial terminology.

Whoah, swearing, look at you mr. tough guy. I care about gross revenues because I consider Apple still a growth opportunity and I stated that I wanted Apple to come out with more and more products so I can stomach near-term compressed margins.

Also it's a degenerate example because you gave an example of a company selling AT A LOSS to increase gross revenues, which this isn't the case. This case is net profits slowing down, but it's still a growth.

Being a bad mouthed child doesn't make me believe a word you're saying. Leave your swearing on the playground, where you belong. Let the big boys talk.

[Jaro65]

Originally Posted by MSUSpartan

Yes the whole industry where the smartest people in the world works are stupid.

Here is to your point: http://qz.com/47058/orlando-the-cat-...-fund-manager/

[AnalyzeThis]

I really enjoyed reading conspiracy theories about $5 drop at the last second on Friday. Like it even matters. I find it entertaining to see prior Friday close at exactly $500.00. What a coincident?

Wow AAPL gained 2.26% today! Feeling better now?

[swagi]

Originally Posted by FrozenDarkness

there's also the saying to be greedy only when others are fearful. Who said that... warren buffet?

Yep...just bought $500 call options

Given my luck I guess Apple will hit 300 by the end of the year.

[Oracle1729]

Originally Posted by FrozenDarkness

Whoah, swearing, look at you mr. tough guy. I care about gross revenues because I consider Apple still a growth opportunity and I stated that I wanted Apple to come out with more and more products so I can stomach near-term compressed margins.

A has nothing to do with B.

Also it's a degenerate example because you gave an example of a company selling AT A LOSS to increase gross revenues, which this isn't the case. This case is net profits slowing down, but it's still a growth.

If all you care about it gross revenue, you don't care if it's a profit or loss. If you care if the company sells at a loss, you care about more than gross revenue.

You're far too ignorant to participate in this discussion and I'm done replying to you.

[jamesnajera]

Update
#1 again

[Avatar74]

Originally Posted by AnalyzeThis

I really enjoyed reading conspiracy theories about $5 drop at the last second on Friday. Like it even matters. I find it entertaining to see prior Friday close at exactly $500.00. What a coincident?

Wow AAPL gained 2.26% today! Feeling better now?

*shrug* One can spend their time waiting and hoping on the less predictable short term price swings of a single security, or they can keep their eyes fixed on the horizon scanning the entire market for every possible undervalued opportunity that exists and diversify for optimal, consistent returns, not chaotic and occasionally catastrophic results.

At any given time I find three to six securities that meet my minimum criteria. My focus is on continuously expanding my portfolio and engaging in very low turnover.

Too much energy spent watching Apple minute to minute sacrifices lots of time that could be spent doing more thorough research on considerably underpriced securities.

[Avatar74]

Originally Posted by StoneJack

*Well, thank you very much for the thoughtful posting, based on experience not many of us have. Maybe its best for Apple and for all others to slow down. Samsung already issued warnings and they have a lot less of profits on lot more smartphones than Apple does. Maybe after all, Apple is right in doing what they do best; making good quality products. Becoming a number one public company in the world was never in their interests and draws too much speculation in.. Just do what you do best - I appreciate Cook's answer even more now, after reading your post.

The best hedge against one's own propensity to make mistakes is to slow down. Every time you expose a dollar of principal to risk of loss, whether you're a company or an investor, you make the job that much harder for yourself.

Let's say you have $100,000 today, and you stick in low risk investments that yield 5% annually compounded for 30 years.

$100,000 * 1.05^30 = $432,194

Now let's say instead of playing it safe you took a huge risk and lost 10% of the portfolio in year one, trying to chase after what you thought was a big upside.... Now you have $90,000 to work with.

The $10,000 you lost amounts to $43,219.34 in 30 years in the previous equation, so for every $1 you lost today, you lost 3.3 more future dollars... now you have to make back that $10,000 with $90,000 so you're going to have to yield 11% returns for the year instead of 5%.

BUT you lost a year of compounding, so it's actually $10,500 you must recover (or 1.05/9 rate of return) to get you back to where you would have been at the end of year one -- i.e. 11.667% instead of 5%. Are you starting to see how badly this could snowball if you continue risking and losing principal every year?

A return of 11.7% is a monumentally more difficult task than 5% which is much nearer to the risk free rate... because to stay at 5% means you're not incurring marginal risk. But now to go after that 11.6% you have to expose yourself to considerably more risk.... which means, ultimately, that you could potentially lose even more money if the nature of your investment analysis has not changed. And, I generally doubt that anyone's investment analysis acumen changes much in the course of just one year....

If you purchased Apple at 600 thinking it was a good buy, and then watched them slide to 400, you made the problem exponentially worse than this example, because while it's a 33% loss, you'll need to generate a 50% return just to break even. Even in a bull market, those kind of numbers are absurd... If you lose your job and/or face a deep shift in market circumstances, and find yourself having no choice but to accept a 5% annual return to claw back without incurring more loss, it would take you 8.5 years to recover at that rate, assuming you had the principal left over with which to recover.

If you extrapolate out this over thirty years, you can see how continuing down the misguided belief of high risk/high return just digs you into a deeper and deeper hole. To wit, the daytrader boards I lurk have as high turnover of users as they do securities... Every couple of years there's a new batch of people, and a few hangers on who are "regrouping" (i.e. finding a second job to pay for the money they blew from their first one).

By the same token, most millionaire "gurus" have made their millions on the lecture circuit. Almost universally every one of them was a failure at business/investing. But among billionaires you will not find a day trader... what you will find is a hell of a lot of value investors.

To quote a certain music business genius, "An image and a good hook can get you in the door, but something has to keep you in the room."

Read Warren Buffett's "The Superinvestors of Graham and Doddsville" published in the Columbia Business School Magazine in 1984 for more on this subject.