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Apple's Stock Price Breaches $600 for First Time in 18 Months
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The stock isn't actually any "cheaper." Splits are exactly like getting two tens for a twenty. If anyone thinks that amounts to having more money, I will happily give you three fives for a twenty, or if you want to feel really rich, ten singles.
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Who, me? Try asking directly.
AAPL is up 5% YTD while the Nasdaq composite is down 2.5%. But I guess I am supposed to expect AAPL to go up every day, regardless of the news, and regardless of overall conditions in the markets -- if not that, then certainly every week, or be horribly disappointed, angry, and critical.
Here's what I mean. I'm a new investor who wants to invest in Apple. And I wanted 100 shares...previously I'd have to spend around $60K for that. Now I only have to spend around $8500. So yes, it can affect if you buy because it's cheaper for you to buy. Admittedly, I don't invest in the stock market, so I maybe understanding the whole thing incorrectly, but if so please explain if you can.
I agree that selling or holding has no effect.
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I agree with you, I was referring to the person who said you'd be disappointed. That would depend on when you bought in I'd think.
If you are a new investor with $8500 to invest, you could buy around 15 shares at the current price or 100 at the post split price. It makes no difference. The investment is exactly the same. No rule says you have to buy shares 100 at a time.
Nobody is ever happy to see the value of their investments go down, whether they are showing a paper profit or not. So this is not really a serious question. But those of us who've been in the markets for a long time know that stock values are going to reflect earnings over the long haul. When AAPL closed over $700 briefly it was on the expectation that earnings would continue to grow at 20% or so annually, as they had for many years. Instead Apple announced flat and even declining earnings for several quarters in a row. Anyone who expects a stock to hold its current value, let alone increase under these conditions, is deluding themselves. The best things a company can do when this happens is pay a dividend and buy back shares, to stabilize the stock price and reward investor patience. Apple has done both.
Holding during these periods can be tough, but if you are an investor, not a trader, it comes with the territory. Either you believe in the company's ability to get earnings back on track, and stand pat on your position, or you don't, and sell out.
This is pretty much the entire story. It's what I have learned in 30+ years as an investor, and more than half of that time in AAPL. Personally, I'd be embarrassed to say that I am disappointed in what my AAPL investment has returned for me.
Anybody "expecting AAPL to go up every day" is either delusional or using hyperbole to further a point of view. That is akin to people pushing the "Apple can't release a game changing product every years". Of course they can't, but it has been over 4 years since the iPad was released - way beyond 1 year. That is also hyperbole.
Personally, I would be even more embarrassed to not be negative about my portfolio value cratering by 40% and still not recovered TWENTY MONTHS LATER. Touting short term YTD numbers to demonstrate performance is not factoring in the impact of the cratering of 40%.
Like other long term investors, I have done very well on my AAPL investment. Much of that was yesterday or older news. The real issue is what has AAPL been doing lately. Not so much, and twenty months is hardly a day trader perspective.
A litany of negatives about AAPL may be tiresome but is a widely shared view of many investors. That is why AAPL ownership by institutional investors is at a low point. Stock buybacks and dividends are really a short term pain reducer - and the buyback has not, IMO, reduced pain for what the expenditure has been. The recent bump in share price has been attributed to significant margin improvement - an area that Cook has been credited for with his supply chain expertise. The fewer shares on the market due to the buyback resulted in a slightly higher EPS but, and I have not seen the numbers, I believe the margin is the higher leverage reason for the bump.
I am in group of several investors, each of us owning several thousand shares of AAPL (yep, a chunk of $$). We are all individually looking at an exit point given the trend under Tim Cook's reign. Questions that are bouncing around include:
Why have we not seen an Apple TV?
Where is the iWatch?
Whatever happened to the Liquid Metal revolution?
Why is it rumored that, once again, engineers are being borrowed from OS X to IOS just prior to WWDC? They have more than enough cash to hire the necessary staff.
Why is the Corporation that envisioned and launched iTunes rumored to be buying Beats Electronics to improve iTunes performance? Can they no longer create the juice?
Why is an apparel CEO being paid many millions of $$ to simply walk through the door into the Apple retail store leadership position? Might the lack of exciting, new products have anything to do with the diminishing performance?
Is Apple's reliance on RSUs to attract new executives appropriate given that it greatly reduces the Pay for Performance link that exists under traditional stock options?
Are Apple's executive hiring practices for senior executives effective?
So where is our exit point? It depends on the narrative at the time that exit point is reached. If a pipeline of innovative / game changing products comes out this year the exit point may get higher. If the status quo continues we are all thinking around $630 or so. If the pipeline does not materialize we will all wish we had sold sooner I guess.
Personally, I would be even more embarrassed to not be negative about my portfolio value cratering by 40% and still not recovered TWENTY MONTHS LATER. Touting short term YTD numbers to demonstrate performance is not factoring in the impact of the cratering of 40%.
Like other long term investors, I have done very well on my AAPL investment. Much of that was yesterday or older news. The real issue is what has AAPL been doing lately. Not so much, and twenty months is hardly a day trader perspective.
A litany of negatives about AAPL may be tiresome but is a widely shared view of many investors. That is why AAPL ownership by institutional investors is at a low point. Stock buybacks and dividends are really a short term pain reducer - and the buyback has not, IMO, reduced pain for what the expenditure has been. The recent bump in share price has been attributed to significant margin improvement - an area that Cook has been credited for with his supply chain expertise. The fewer shares on the market due to the buyback resulted in a slightly higher EPS but, and I have not seen the numbers, I believe the margin is the higher leverage reason for the bump.
I am in group of several investors, each of us owning several thousand shares of AAPL (yep, a chunk of $$). We are all individually looking at an exit point given the trend under Tim Cook's reign. Questions that are bouncing around include:
Why have we not seen an Apple TV?
Where is the iWatch?
Whatever happened to the Liquid Metal revolution?
Why is it rumored that, once again, engineers are being borrowed from OS X to IOS just prior to WWDC? They have more than enough cash to hire the necessary staff.
Why is the Corporation that envisioned and launched iTunes rumored to be buying Beats Electronics to improve iTunes performance? Can they no longer create the juice?
Why is an apparel CEO being paid many millions of $$ to simply walk through the door into the Apple retail store leadership position? Might the lack of exciting, new products have anything to do with the diminishing performance?
Is Apple's reliance on RSUs to attract new executives appropriate given that it greatly reduces the Pay for Performance link that exists under traditional stock options?
Are Apple's executive hiring practices for senior executives effective?
So where is our exit point? It depends on the narrative at the time that exit point is reached. If a pipeline of innovative / game changing products comes out this year the exit point may get higher. If the status quo continues we are all thinking around $630 or so. If the pipeline does not materialize we will all wish we had sold sooner I guess.
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Before the Beats rumored buyout, I was planning to hold until after the split. Then, sell after the initial bump from the split, and buy back when it recovers and market indicators show signs of a newer upside.
Post Beats, I'm going to sell and buyback when either (1) the deals falls through, or (2) if there's a sell off, buy back after the shakeout. Before this buyout, I felt given the recent news, even if the broader markets sell off (Nasdaq), AAPL was going higher.
Now, all bets are off. Apple will fall as the market falls. For the short term, I now treat the stock as I would the indexes, until they prove again the stock is going to outperform the indexes.
If there is further market weakness, Apple will sell off like the rest, where before the Beats rumor, they were insulated because of their stellar quarter, split, and dividend announcements.
This is about the next 6 - 12 months, and Apple is showing signs they may no longer be able to lead the industry in innovation.
I mean, they can't even create a streaming music platform?
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In my view, the biggest question will be iPhone 6.
Will it redefine the phone the industry? Will it be innovative? Will it suffer production run issues? And, most importantly, will it (1) sell, and (2) maintain profit margins given the erosion of the 2 year contract subsidy model?
Once we clear this Beats thing, I'll bet on iPhone 6, but will have some put options in place if it doesn't work out.
Right, values don't change. Usually, post split, stock goes up because more are buying it (those who couldn't afford the price before), then it sells off after the post split momentum has wavered.
Just as in dividends where people think it's free money. It isn't, since your stock price will decrease by the "exact" amount of the dividend. In Apple's case, I'd much rather they return the cash to us, rather than having it in retained earnings for wasteful and inefficient capex spending, such as paying $3.5 Billion for Beats.
Sorry, but both of these explanations are wrong.
Splits do not in themselves have any impact on the market value of a stock. They don't "usually" do anything as a result. There is no reason whatsoever for a stock to develop any momentum one way or another because of a split.
http://www.investopedia.com/articles/01/072501.asp
Also, dividends are not in any way linked to the value of stock. Cash on a balance sheet is an asset. Stockholders own equity in the company, not its assets. As far as the shareholders are concerned, it is in fact "free money."
You may be confusing this with the "ex-dividend" effect. This is a temporary result of the shares trading (for about a week) with a dividend payable to the stockholders of record when the dividend was declared, but before it is paid. This means the buyers of ex-dividend shares will not be entitled to a dividend until the next quarter. Shares will typically trade at a small discount during the ex-dividend period, but this cancels itself out once the dividend is paid. AAPL is trading ex-dividend right now.
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This is a fool's errand as an investor. Trying to outguess the markets will nearly always be a losing proposition. Even the pros can't do it consistently. Patient investors can win. Traders who think they are smarter than the markets will unfailingly lose.
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Ok I guess what I was saying was that I would think people would be more liable to buy a stock if they can get more shares for the price. In other words, if I buy 15 shares at $600, and the stock goes to $700 i make $1500.
If I buy 100 shares at $75 and the stock goes to $175, I make $10,000. I just used 100 as an example for simplicity. If I have more shares, I'll make more money if the stock goes up.
Therefore, a cheaper share price can affect someone's decision to buy. They may not want to spend $8500 just to get 15 shares, if they can spend $8500 and get 100.
It doesn't work that way. If the stock was going to go from $600 to $700 pre-split, the same post-split move from $75 is to $87 (16.6%). You will not make more money either way, plain and simple. If anyone is making a decision to buy or sell based on this logic, then they should stay as far away from the stock markets as possible.
This will be a very short reply.
1) "Usually" after a stock splits, they tend to go up, since it appears cheaper and more affordable. Not always, but usually. There are no absolutes in the market.
http://finance.zacks.com/stock-price-typically-up-after-forward-split-1189.html - Another link. Not sure why I'm posting links, but this will surely be the last one. I must have way too much time on a Sunday.
2) Buy and hold until time immemorial is fine in the beginning of a bull market, but "fools gold" during the late stage. Can't time the market is the notion espoused by FA's, mutual funds and brokerage firms who want a fee for managed assets.
3) If I own ABC stock valued at $100. On the ex-div date, for a $2.50 dividend, the stock immediately decreases to $97.50 to reflect my dividend. Irrespective of the stock going up or down, my stock value has reduced by $2.50 to reflect the dividend. How is that free for me? Cash exits the balance sheet, stock goes down. Now, it may go up higher to mask my dividend payout, but it will always be $2.50 less, regardless if it goes up or down.
http://groupssa.com/dividendsarenotfreemoney.html - By the way, one of the things I dislike most about online forums is this incessant need to post links to back up the veracity of a point. But, here's one which illustrates what I'm trying to articulate if you're the sort who gives more credence to online links.
There are no absolutes, even if it's taken from the that sagely publication Investopedia, or whatever.
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Ah, that makes sense. Thanks for being patient and explaining it.
There are 1000s of reasons, all of them fluid changing from one moment to the next, on whether or not to buy a stock.
Splits are but one small criteria on a wide area of indicators on deciding when, and whether or if to buy a stock. However, to suggest "splits" have no bearing on potential stock movements as an absolute would only be espoused by paper theorists who have only "read" about investing, but have never had the experience of navigating through several crashes.
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The split makes it easier to sell and stay within the gain that will not trigger an undesirable tax rate. Clearly, this was not Apple's reason to split. Just a nice side effect for those of us who may have been holding shares forever.
The share price drop was result of the proposed Beats sale. There has to be more to this than headphones. I'm not a huge Cook fan but he is a bean counting sensation. Difficult to believe this deal was not carefully vetted. I'm hoping for the best.
1) This has been studied extensively. It is not true. If you think about it just a bit, the reasons why will become obvious.
2) Nobody suggested "until time immemorial," so this is an entirely reductive argument. The fact is, nobody knows when the markets will change, or how they will change. You are completely wrong about the second point as well. In fact you are 180 degrees off course. Since you dislike links, on your own, look up: Eugene Fama, David Swensen.
3) Not true either. Again, you are confusing the ex-dividend effect, which is an entirely different thing that at least theoretically happens right before and after the ex-dividend date, the bid-up, bid-down based on the value of the dividend. The example on the page you cited is absurd, because it assumes that stockholders own the company's cash. They do not, unless they buy the entire company. Otherwise, cash and any other asset owned by the company might as well be on Mars, as far as common stockholders are concerned. If you've ever own stock in a company that goes into bankruptcy you will know what I mean without further explanation. Suffice to say that you, as a stockholder, are in last position to claim any part of any assets the company owns. You will almost certainly get nothing.
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How? This assumes, I am guessing, that stock still has to be sold in round lots.
It shouldn't, logically, but it does. It's psychological; people like being able to buy 100 shares rather than 10, or even 50 rather than 5. People look at a stock and often consider it "too expensive" when it's in the hundreds (let alone the thousands). And sometimes people only have a bit of money to invest (say, $2,500) and they can't invest exactly what they want if it's at a high multiple.
Granted, this has no effect on corporations buying up the stock, but as 40-50% of stock owners are typically individual investors, well.. it makes a difference.
1) If it is your belief and contention that stock splits have ZERO effect on the potential of pushing up stock's demand, there's nothing more for me to add on this topic.
2) I don't need studies to tell me what I know to be true. Sure, no one can time or call tops or bottoms 100% of the time, but it's certainly possible, though never a certainty, to avoid the absolute tops and bottoms. While I can't assert I've read and studied more on this topic than you, I certainly have more academic knowledge and real world experience on this topic than 99% of the general population. An analogy, regardless of the amount of studies, an Epedmiologist knows "fat is bad and all cholesterol is harmful" is pure rubbish.
3) A stock's valuation is what it's worth (future EPS, rev growth, assets, goodwill, etc....) minus its liabilities. If there were no liabilities, then shareholders would have rights to all the assets and cash, less taxes and wages. A stock's valuation is what its worth; and, if your position is that (1) cash has no bearing and not one of the metrics used for valuation, and (2) that valuation is unaffected by the the disappearance of cash (whether its by imprudent capex, dividends or embezzlement), then there's no longer anything I can add to this topic.
As you wish, but it doesn't. Cause and effect are often mixed up. Companies split their shares generally because the stock is experiencing upward momentum. If the momentum continues post-split, the split itself cannot be said to have had anything measurable to do it.
It doesn't take missing a market top or bottom by much for an investor to have been better off holding. This has been studied extensively in recent years and has become the basis for modern portfolio theory, which you should also look up. Even people who are paid huge salaries to manage funds and have way more information at their disposal than most of us are poor guessers. The fact is we are all human, and being human, we tend to follow crowds. In the case of markets, it means we will sell too early and buy too late. Admitting that you aren't smarter than the markets is a good place to start if you want to be a rational and successful investor. It's liberating, really.
A stock is not really valued on the basis of assets, or liabilities. Stockholders don't own a company's assets -- unless one of them buys all of the company's equity, in which case they own everything (including liabilities). The only other time assets make any real difference to a market valuation is when the stock trades near (or even below) book value. This is the markets saying that the company's enterprise value is little, nil, or negative, but the assets are worth something. Essentially this is the company's takeover and/or breakup value, and forms a kind of floor for the stock price (assuming the company isn't gushing cash). For a profitable company, book value is of no real interest to investors because it will be much lower than the value of their business.
Note that basic stock metrics like PE don't include assets or liabilities. They include income from assets and debt service, but not the underlying investments themselves, or the liabilities. You can argue all day that it should be different, but that's the way it is.
I don't have any academic background in this. It's all just stuff I've learned over the years.
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I understand the point, but I defy anyone to measure it. At most the affect is on tiny (and very unsophisticated) investors, and they are not the investors who move markets.