Yes, I meant cash flow when I said sales. I like your three M's. The moat is an interesting issue. And I wonder as so many of our companies become more and more digital, how much more important it is going to be to have a moat. Not to mention as competition becomes more global. We are clearly just at the start of global competition. And major players, especially in Asia, are just getting going over the last 20 or 30 years.
Moat is even more important in a global economy where artificial barriers to international trade shrink. There have to be real, sustainable competitive advantages to a brand when international politics can't keep out other competitors in certain markets you do business in. So moat remains a big factor in my evaluations.
That and I tend to focus on manufacturing companies because that makes the job of valuation utterly simple.
I hope you got out at a good time.
I sold at $340. Given my cost basis, I was more than satisfied with the result.
If Apple doubled its dividend, then I think it would be both a great income stock and a possible growth stock. And while I trust management there to make great products that get sold for lots of money, they can't just pump all this cash into the innovation machine and they aren't Buffett and able to go out and make money doing acquisitions. So as smart as management might be, they clearly can't actually put the capital they have into play. And so the cash pile grows.
You do make a good point in that this new phase in Apple's management doesn't give me the confidence that I had before (though that has little to do with why I'm not looking at Apple as a buy).
However, they do make a number of small, strategic acquisitions. Two things they excel at better than any of their competitors are:
1. Supply chain management, which benefits from the hordes of excess cash because they can tie up materials to keep competitors costs high. Having the excess cash gives them both a huge cushion against supply chain snafus as well as a very big negotiating chip.
2. Trojan horse acquisition.... Putting Siri together with Nuance created a new paradigm for search that may be a little ahead of its time for compelling adoption but it's going to change the way we think of search, forever. Google had better be very nervous about that, and if they're not then someone needs to get fired over there.
Apple has a huge opportunity in harnessing search heuristics to completely revolutionize productivity with digital devices: If I can tell Siri to book a table at a Dallas restaurant for 7pm, and it goes and does it... which it is fully capable of now, just think what using digital devices will be like five years from now. The concept of an input device will be moot, because the space between your thoughts, actions and results will be removed.
But Apple needs to understand that's what they're sitting on. In the past, they'd made mistakes... Sculley didn't know what to do with Hypercard, and yet in 1985, Cray researchers were using it to interface, over ethernet, with their X-1 supercomputers... Let me put that another way: Apple had hypertext almost ten years before Berners-Lee created HTTP and the World Wide Web... Ironically, Berners-Lee wrote WWW on a NeXT workstation and was inspired in part BY Hypercard. That is probably Apple's single most monumental blunder.
Can Apple leverage Siri? I don't know, but the first card has been played, the game has changed. The same way iPhone raised the bar of expectations with regard to usability of smartphones. They single-handedly killed RIM and Palm, and they're going to destroy Google if they have a 10 year roadmap laid out the way they did with the Intel transition. I still think their biggest bombshell of all time was revealing that the long rumored Marklar project was real...
What bearing does that have on their growth prospects? Nothing particularly outstanding, in my opinion. They'll continue to perform respectably and be a relatively stable blue chip... but their contributions will spur other competitors to move faster (and already have), so they'll be one player among many which is good for the consumer. But they will continue to be a step or two ahead of everyone else because of their adherence to Henry Ford's principle about innovation, "If I'd have asked my customers what they wanted, they'd have said, 'A faster horse.'"
They'll never do as much volume as other manufacturers, but I'm certain that Ferrari doesn't cry that they don't sell as many cars as Ford. The issue now for investors is, as they reach maturity, their terminal value is still lower than their current stock price. So either stock price needs to come down, or they need to substantially grow book value, and they can't do that by issuing larger dividends. Capital needs to be reinvested in strategic acquisitions and partnerships that will bring Siri to the front so that it doesn't matter what form factor their next device takes on.
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Hmm, you and Avatar are making me a little nervous about my Apple position.
If you're nervous but you've achieved a satisfactory return, take it. I learned long ago to not keep positions that make me lose any sleep. There are many other fish in the sea at varying depths and of varying species... *shrug*
But I suspect a 10% gain isn't what you mean by a great year. 
