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Old Jan 26, 2012, 10:06 AM   #326
AppleScruff1
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Originally Posted by elistan View Post
Wait - so now you're saying that the sterotypical Apple user likes to purchase things at a discount, including refurbished products, from a source that doesn't charge sales tax, thereby saving money? How does this fit it with your assertion that Apple users enjoy spending more money than non-Apple users? The two seem to me to be direct contradictions.

Or are you trying to say that simply because we prefer, say, the $199 Apple iPhone 4S over the $9.99 Samsung Galaxy S II (referbished) it's ONLY because the iPhone is priced higher? Meaning, for example, you think that every Apple user would immediately trash their Apple iPad if they own one in favor of an HP WebOS based device if HP priced it at $1499?
You all missed the point. Go back and read my first post on the subject. It's not worth trying to explain when the audience only sees things with tunnel vision.
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Old Jan 26, 2012, 10:08 AM   #327
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Originally Posted by elistan View Post
Wait - so now you're saying that the sterotypical Apple user likes to purchase things at a discount, including refurbished products, from a source that doesn't charge sales tax, thereby saving money? How does this fit it with your assertion that Apple users enjoy spending more money than non-Apple users? The two seem to me to be direct contradictions.

Or are you trying to say that simply because we prefer, say, the $199 Apple iPhone 4S over the $9.99 Samsung Galaxy S II (referbished) it's ONLY because the iPhone is priced higher? Meaning, for example, you think that every Apple user would immediately trash their Apple iPad if they own one in favor of an HP WebOS based device if HP priced it at $1499?
No worries. It's impossible to keep up with the "supposed experts" ever changing theories here. Some could even be labeled as the "Kings of Contradiction."

Also, ever notice how us Apple folks are always "missing the point" according to them? Too funny.
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Old Jan 26, 2012, 10:22 AM   #328
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Originally Posted by Cinematographer View Post
You can find some of the information here: http://investor.apple.com/sec.cfm
RE: Avatar74

I looked at the financial statements now, and I do see that Apple made next to NOTHING on their "cash" on page 6 and 7 of their financial statements.

It does show their investment performance, and they made close to ZERO.

It's a non aggressive portfolio of some kind. Not my style, but of course I don't have 100B in savings! haha.

I don't care that much, but yeah, when people call it CASH, I think they are right. It's "cash" or "worse than cash" in my opinion. They should be a little more aggressive - or buy gold bullion or do something cool with that cash.

Maybe they could just cure cancer, or world hunger, or send a spaceship to Mars - that would bring a lot more good will than $500.00 off of a macbook.

Dividends would be kinda nice, but then you get hooked on continuing to pay that out, but then it would at least draw in more shareholders too and raise the stock price.

Anyway - my point is that the 100B appears to be "cash" holdings, sitting on it and doing nothing with it for now.
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Old Jan 26, 2012, 10:28 AM   #329
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Originally Posted by BuddyTronic View Post
Anyway - my point is that the 100B appears to be "cash" holdings, sitting on it and doing nothing with it for now.
Apple isn't an investment firm! The point of their short and long term investments are not short term financial gains. They are going to be strategic investments for the most part in potential new technologies and the such. Battery tech, screen tech, etc.
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Old Jan 26, 2012, 10:28 AM   #330
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Originally Posted by linux2mac View Post
No worries. It's impossible to keep up with the "supposed experts" ever changing theories here. Some could even be labeled as the "Kings of Contradiction."

Also, ever notice how us Apple folks are always "missing the point" according to them? Too funny.
Man, all Android users like cheap crappy phones...I'm not stereotyping or anything, though. LOL
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Old Jan 26, 2012, 10:37 AM   #331
Avatar74
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Originally Posted by BuddyTronic View Post
It does show their investment performance, and they made close to ZERO.

It's a non aggressive portfolio of some kind. Not my style, but of course I don't have 100B in savings! haha.

I don't care that much, but yeah, when people call it CASH, I think they are right. It's "cash" or "worse than cash" in my opinion. They should be a little more aggressive - or buy gold bullion or do something cool with that cash.
Well, its not cash in the sense that the treasuries, munis and CD's they hold cannot be liquidated without penalty, and certainly can't be settled immediately. And securities have variable value and marginal risk, which cash and equivalents do not.

I would never, as a business analyst or as a consumer managing his own accounts, ever call it "cash"... to do so is a mentality that gets a lot of people in trouble (in the opposite direction of a Warren Buffett, who had socked away the equivalent of $96,000 by the time he was 21).

And let's put their returns in perspective. About a third of their portfolio is in corporate securities. Hedge fund managers did as badly as posting LOSSES of 48% this past year. So I would say their 0.3% positive return was pretty good.

EDIT: It also tells me that contrary to your supposition, their corporate securities are a moderately aggressive portfolio... because aggressive growth portfolios get hit hardest in years like this, and that offset whatever fixed yields they were picking up in the low single digits. Had they truly invested conservatively, then their overall yields would be maybe in the +3% range, which again wouldn't have been bad in a year where fund managers were doing poorly, and the S&P did about 4% for the year.... and you'd be hard pressed to find a lot of fund managers who can beat the S&P every year.

If there's one thing Buffett and Graham (and a lot of foolishness in my younger years) had taught me, it's that investing isn't about making slam dunk decisions every time. It's mostly about knowing how to insulate yourself from the catastrophic decisions you will inevitably make from time to time.

"Any number times zero is still zero." - Warren Buffett

What does the above statement mean to me, as an investor? It means that pursuing high returns risks loss of principal. Every dollar of lost principal is more than a dollar in Future Value (principal plus compounded annual returns over time). So 12% times every one of the dollars you've already sacrificed is still zero. But 5% times all the dollars you didn't lose is greater. Over time, who wins in the end?

Apple is playing it very smart by avoiding depletion of principal, and setting themselves up to outlive every other competitor in every other sector by doing so. Remember, all they have to do as a corporation is outlive their competitors. The competitors will bankrupt themselves all on their own if they keep reaching for unsustainable returns, because all it takes is one catastrophic decision to wipe you out entirely in one bad year.

Given that, there's a tremendous amount more total good they can do over that period of time than the amount of good that a fast and easy hedge fund manager could do in one year of charitable contributions right before he annihilates himself and his clients... and doing it out of the balance of their returns, not their principal, is the surest way to ensure they can KEEP doing good things for customers, for shareholders, 24,000 employees and the public at large for decades to come.
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Old Jan 26, 2012, 11:56 AM   #332
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Originally Posted by AppleScruff1 View Post
You all missed the point. Go back and read my first post on the subject. It's not worth trying to explain when the audience only sees things with tunnel vision.
Oh! Wait wait wait! I think I have it figured out! Your point has been misinterpreted not because we're willfully twisting it or we're wearing blinders or having tunnel vision, but simply because your statement was worded in such a way that it meant something different than what you think it meant.

You said: "They [Apple customers] like to pay more and get some sense of personal satisfaction from the fact that Apple makes more money than any other company." First, that "and" has been taken as a conjunction of two seperate concepts, except that you meant it to imply a causal link, right? Perhaps you should have used the phrase "in order to." Second, your statement implies the "more" is in comparison to Android and other non-Apple products, not the "more" you intended as in "more than if Apple made no profit." To rephrase your point, you could have said, "Apple customers get personal satisfaction out of Apple having high profit margins, and therefore they enjoy paying more than they need to in order to achieve this." For example, Apple's $13.06 billion in profit spread across 73.07 million products sold means Apple could have reduced prices this past quarter by $178 per product on average if they were willing to make zero profit. And your point is, that would have made all Apple customers sad, right? (Or at least, not-as-happy-as-otherwise.)

My refutation of your point... is rather complicated. I'll just say that my opinion of your point based on my revised understanding continues to be that you're incorrect. I'll post later if I have time, and you confirm that my revised understanding is correct.
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Old Jan 26, 2012, 12:03 PM   #333
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Originally Posted by elistan View Post
Oh! Wait wait wait! I think I have it figured out! Your point has been misinterpreted not because we're willfully twisting it or we're wearing blinders or having tunnel vision, but simply because your statement was worded in such a way that it meant something different than what you think it meant.

You said: "They [Apple customers] like to pay more and get some sense of personal satisfaction from the fact that Apple makes more money than any other company." First, that "and" has been taken as a conjunction of two seperate concepts, except that you meant it to imply a causal link, right? Perhaps you should have used the phrase "in order to." Second, your statement implies the "more" is in comparison to Android and other non-Apple products, not the "more" you intended as in "more than if Apple made no profit." To rephrase your point, you could have said, "Apple customers get personal satisfaction out of Apple having high profit margins, and therefore they enjoy paying more than they need to in order to achieve this." For example, Apple's $13.06 billion in profit spread across 73.07 million products sold means Apple could have reduced prices this past quarter by $178 per product on average if they were willing to make zero profit. And your point is, that would have made all Apple customers sad, right? (Or at least, not-as-happy-as-otherwise.)

My refutation of your point... is rather complicated. I'll just say that my opinion of your point based on my revised understanding continues to be that you're incorrect. I'll post later if I have time, and you confirm that my revised understanding is correct.
Just chalk it up to the level of stupid in this forum as being too damn high.
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Old Jan 26, 2012, 12:14 PM   #334
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If Apple were to issue a 2% stock dividend (above money market rate) to attract pension funds to their stock, it would cost $8.3B a year at current prices. Apple trades at a P/E ratio of about 12.5 or about 10 times next year's earnings. That P/E is low by comparison to other companies in the industry or companies with similar growth rates and profitability. Therefore besides organic growth, AAPL is subject to multiple expansion as soon as the Fed gets out of our economy. They announced yesterday they will not even start doing that till 2015. So Apple will price on organic growth only till then in all likelihood.

By comparison Google has a PE of 19 and Amazon has a PE of 102.

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Old Jan 26, 2012, 02:50 PM   #335
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Originally Posted by Rocketman View Post
If Apple were to issue a 2% stock dividend (above money market rate) to attract pension funds to their stock, it would cost $8.3B a year at current prices. Apple trades at a P/E ratio of about 12.5 or about 10 times next year's earnings. That P/E is low by comparison to other companies in the industry or companies with similar growth rates and profitability. Therefore besides organic growth, AAPL is subject to multiple expansion as soon as the Fed gets out of our economy. They announced yesterday they will not even start doing that till 2015. So Apple will price on organic growth only till then in all likelihood.

By comparison Google has a PE of 19 and Amazon has a PE of 102.

Rocketman
Apple's P/E is currently 16. If your argument is that they have room to move upward because their peers are trading at higher P/E's, this is where as a business analyst I have to point out the absurdity of the P/E ratio.

Amazon and Google do about a third of Apple's revenue, but they have 300-400 million shares outstanding. Apple has over 900m shares outstanding.

For Apple to trade at a PE of 102, relative to their CURRENT earnings, their market price would be $1,387, or more than four times their total enterprise value (~$390/share, accounting for ten years of forward operating cash flows discounted to net present value). this would also put their market capitalization at $1.3 trillion or 10% of the total US GDP.

I would caution that P/E is not a meaningful basis for this analysis, precisely because its usefulness breaks down at this kind of scale. As a company scales further and further, there isn't enough remaining market opportunity or growth rate opportunity because the numbers get so large that continued double digit growth requires a larger movement of the needle than for which a market actually exists... you're depleting your available pool of opportunity. So I would expect Apple's P/E to actually keep narrowing relative to their peers.

Apple's shares are already 70% institutionally owned, so I don't know that offering a dividend would be as productive a use of their money than, preferably, a share buyback to normalize their outstanding volume and limit speculative activity at a time where Apple's tremendous market value puts them in a volatile position with significant downward pressure under current market conditions.

Case in point: Berkshire Hathaway has returned 22% year over year growth in the book value of its investments for forty years running, and it still is trading at 16-17 times earnings ($119k per share vs. $7k earnings per share). Apple has yet to outperform the longevity and consistency of this feat, and even Berkshire can't keep it up because of increased frequency of global catastrophes impacting the available float of Berkshire's reinsurance operations. Berkshire is one of the largest conglomerates and like Apple does over $100b in revenue. Berkshire's price very closely tracks with their aggregate book value, and that is a truer reflection of their operating growth than wildly speculative market prices. It would be very smart for Apple to decrease outstanding volume, as unfortunate as that would be for speculators who treat the market as a casino and the brokers and analysts whose careers are heavily dependent upon that transactional volume no matter how deleterious speculation is to one's long term portfolio.

In other words, a shrewd person ignores what price the market thinks you should pay... which is why P/E is an utterly meaningless ratio. It only tells you how much more than earnings everyone else was dumb enough to pay. It doesn't tell you what a smart investor should pay.
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Old Jan 26, 2012, 03:13 PM   #336
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Originally Posted by Avatar74 View Post
as a business analyst I have to point out the absurdity of the P/E ratio.

Amazon and Google do about a third of Apple's revenue, but they have 300-400 million shares outstanding. Apple has over 900m shares outstanding.

I would caution that P/E is not a meaningful basis for this analysis

Apple's shares are already 70% institutionally owned, so I don't know that offering a dividend would be as productive a use of their money

than, preferably, a share buyback to normalize their outstanding volume and limit speculative activity at a time where Apple's tremendous market value puts them in a volatile position with significant downward pressure under current market conditions.

Berkshire is one of the largest conglomerates and like Apple does over $100b in revenue.
It's a pleasure to respond to a smart post. I got my PE figures real quick from Google finance.

I agree that issuing a dividend has no value with Apple already 70% institutionally owned.

I feel there is no good reason to buy back shares with scarce capital. For one thing why should Apple care if the shares are incrementally higher with a huge use of cash with shares at highly elevated prices even compared to 2 years ago. When AAPL was 80-90 I was suggesting buy backs, even leveraged. Brokerage leverage rates were still about 3% back then, rather than 1% now.

I think Apple should not do a buy back or a dividend. I think they should continue to use capital to capitalize larger product releases and more worldwide product releases until that feature is maxed out.

Apple should invest any treasury funds they have into more productive ventures or assets than short term securities. I would like to see Apple transition to a holding company for a variety of businesses which they manage using principals they develop at Apple U.

I doubt I will get my wish.

If there is another March 2009 like market crash they should certainly do a leveraged stock buy back. I actually think they could go private.

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Old Jan 26, 2012, 08:33 PM   #337
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I would like to see Apple transition to a holding company for a variety of businesses which they manage using principals they develop at Apple U.
Diversified holding companies of unrelated business in general have not done well (...unless your name is W.Buffett.) What works really well for one tech company does not necessarily work for another company in a completely different business environment, as many conglomerates have discovered by experience.

Whereas, holding a measured fraction of one's worth in cash, more when the economic situation is uncertain, is often considered a necessary part of a smart investment diversification strategy, for company... or for an individual.
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Old Jan 26, 2012, 09:31 PM   #338
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I think Apple should not do a buy back or a dividend. I think they should continue to use capital to capitalize larger product releases and more worldwide product releases until that feature is maxed out.
At the current market price, I agree.

Quote:
If there is another March 2009 like market crash they should certainly do a leveraged stock buy back. I actually think they could go private.
In that scenario, yes. In fact that's precisely the type of scenario in which I wait to buy a stellar company, when the market unfairly underprices them. I don't play speculative guessing games on where they might be, I just stick to buying them when I know at this moment they're underpriced. Though I would prefer they did this with available cash, equivalents and funds they could liquidate from short term securities... rather than leveraged recapitalization. They could retire the debt in a relatively short time at their current run rate on earnings, but for that duration they'd pay a hefty premium and incur what I think is a relatively unnecessary risk for a company in their unique position.

Going private? That's a tall order. It's difficult to raise such large swaths of capital without eating into their principal cash with which they generate constant streams of investment income to stabilize them during periods of economic or supply chain turmoil, insulate themselves from losses to legal settlements, and the like... But I would prefer a model like Berkshire's where they limit speculators by avoiding splits, keeping the outstanding share count very low, and thus force a market price that tracks very closely to their tangible book value. There would never be a shortage of upward pressure on price as long as they keep outperforming their earnings targets.

But in all other respects, Berkshire is almost as private a public company as you can get and I like that model... the key difference, however, is that Berkshire has a degree of management transparency that Apple will never have. I can't see Apple publishing annual shareholder letters in the style and level of detail as published by Warren Buffett.
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Old Jan 29, 2012, 04:49 AM   #339
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I've been a longtime believer and fanboi.

Holding over 7000 shares of AAPL, at an average price of $17, in my IRA.

Sold it all out today at $459 (in the aftermarket). While I believe it's still going up long-term, the biggest growth is now over and I'm getting closer to retirement age.

Thanks to Steve Jobs, and my fortitude in holding on thru ups and downs, I've gone from a nice retirement to a spectacular retirement.
Just admit it, you're Forrest Gump, aren't you? Come on ...
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Old Jan 31, 2012, 09:08 AM   #340
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Apple isn't an investment firm! The point of their short and long term investments are not short term financial gains. They are going to be strategic investments for the most part in potential new technologies and the such. Battery tech, screen tech, etc.

no they are not. They are treasury bills haha. Check it out.
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