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Apple Worth More Than $100 Billion
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I'm not convinced it's over-inflated Apple's doing very well with it's retail stores, they make twice the profit of Tiffany (high end jewellery store) per square foot, which is incredible. And their margins are 30% (vs 15% in the rest of the industry) which means people clearly think their products are a lot better than other electronics manufacturers if they are prepared to pay the premium.
"What would I do? I'd shut it down and give the money back to the shareholders,"
Tee hee! That Michael Dell... such a card!
I had planned to sell at $100, but with the iPhone coming in June, I am planning to sell that day or the next at around $135. With my profits, I will buy that island in the Bahamas and a 35 foot cruiser to take me back and forth from Miami.
Interesting. Apple's capitalisation is one third of Microsoft's. How does the turnover of the two companies compare? OK, lets forget Zune
But when you compare operating systems, Vister's on loads of computers compared with OSX. Also MS sells lots more than just OS software: systems software, PDAs, the Office cash cow, etc.
My point is that it seems that the market may be a little out of line here as Microsoft is much bigger than Apple. And Dell makes an awful lot more computers than Apple.
I've always felt that share markets are more of a beauty contest than reality.
But when you compare operating systems, Vister's on loads of computers compared with OSX. Also MS sells lots more than just OS software: systems software, PDAs, the Office cash cow, etc.
My point is that it seems that the market may be a little out of line here as Microsoft is much bigger than Apple. And Dell makes an awful lot more computers than Apple.
I've always felt that share markets are more of a beauty contest than reality.
Agreed...AAPL was at a low of around $13 about a month before they released the iPod and iTunes.
What we know now..
reverse those two
iTunes before iPod. iTunes 1 didn't even support iPod. I believe iTunes 2 was the first to offer iPod support.I remember using iTunes 1 with my Creative Nomad...
Good stock picking is about doing your basic research and looking long-term. And knowing when to take a little money off the table.
I bought AAPL 10 years ago because of the long-term prospects (which many panned at the time). I sold off a quarter of my holdings after the Jobs cancer scare. Anyone who goes long-term in this stock has to keep in mind that if anything (God forbid) were to happen to Steve, this stock would tank 40% in moments. You cover yourself by taking some money off the table when you're up, using stop/loss orders that are say, 10% below the current price, and/or by buying cheap put options as insurance.
That said, AAPL can be played short term using options, but with all this interest that carries some hefty premiums. For example, I bought 5 July 100 calls back in April for $4.50. Sold 2 of them when they doubled, and have the 3 left (currently at $20). Now we see how greedy I can get by letting them ride.
For those that don't know how options work, they are a great way to play the stock with relative pocket change. You are either betting that the stock will go up (buy calls) or go down (buy puts). A call gives you the right to buy (or sell) the stock before some set date at a set price. Each call or put covers 100 shares, so you can "have" more stock than if you bought shares outright.
For example, those 5 calls I bought gave me the right to buy 500 shares at $100. At $4.50 each, that was an investment of $2,250 plus commissions. If the stock goes to $120, the options are worth about $20, a net profit of $15 in round numbers. (15)(500 shares) = $7,500 profit on that investment. In contrast, if you instead bought AAPL stock outright at $95, you could only have bought about 24 shares. At $120 that nets you $25 per share or $600 profit. A marked contrast!
Of course, if the stock went down to $90, or $80, the options could be completely worthless at or before expiration whereas you would maintain most of your investment if you had bought the stock. But your loss is limited to the amount you bet in either case.
There is another and less risky way to get into AAPL more cheaply than buying it outright. Buy deep in the money calls - for example, July $70 calls cost about $50 when AAPL is at $120. But because these are so deep in the money, their price fluctuation is almost identical to the stock price and not hypersensitive to a $5 dip as a $115 option would be. In short, you can spend $7,000 instead of $12,000 to control the same number of shares (100), and if the stock goes up your upside gain can be great.
One further elaboration is buying puts as insurance on the shares you own (this is really what options are for). Let's say, AAPL is at $120 and you own 1,000 shares. Your investment is valued at $120,000. You can buy July $100 puts at roughly $0.65. You purchase 10 of those as insurance to cover your investment for (10)(0.65)(100) = $650.
If AAPL stays at $120 or higher through the expiration on July 20, your puts (insurance) expire worthless. Not unlike that life insurance or auto collision insurance that you have. But let's suppose it turns out that the iPhone is delayed by a court injunction or something terrible happens and the stock loses a quarter of its value, plunging to $90 a share.
Without the covering puts, your investment went from $120K to $90K, a $30K loss. With the covering puts, your shares have the same loss, but your puts are now worth $10 each. So you gain $10,000 (less the $650 you spent as your insurance premium), and your net loss is only $21.65K. And if had ponied up $1,950 to buy 30 covering puts, your net loss would only have been that $1,950!
Wow, this is too lengthy already. Stop/loss is another way to lock in gains if the stock starts to tank. Look it up on any investment site.
Standard "not an investment broker/adviser, you may lose everything" disclaimers here. There are plenty of basic stock investing sites that discuss options in detail, and you should go read up on those before trying anything like this of course.
I bought AAPL 10 years ago because of the long-term prospects (which many panned at the time). I sold off a quarter of my holdings after the Jobs cancer scare. Anyone who goes long-term in this stock has to keep in mind that if anything (God forbid) were to happen to Steve, this stock would tank 40% in moments. You cover yourself by taking some money off the table when you're up, using stop/loss orders that are say, 10% below the current price, and/or by buying cheap put options as insurance.
That said, AAPL can be played short term using options, but with all this interest that carries some hefty premiums. For example, I bought 5 July 100 calls back in April for $4.50. Sold 2 of them when they doubled, and have the 3 left (currently at $20). Now we see how greedy I can get by letting them ride.
For those that don't know how options work, they are a great way to play the stock with relative pocket change. You are either betting that the stock will go up (buy calls) or go down (buy puts). A call gives you the right to buy (or sell) the stock before some set date at a set price. Each call or put covers 100 shares, so you can "have" more stock than if you bought shares outright.
For example, those 5 calls I bought gave me the right to buy 500 shares at $100. At $4.50 each, that was an investment of $2,250 plus commissions. If the stock goes to $120, the options are worth about $20, a net profit of $15 in round numbers. (15)(500 shares) = $7,500 profit on that investment. In contrast, if you instead bought AAPL stock outright at $95, you could only have bought about 24 shares. At $120 that nets you $25 per share or $600 profit. A marked contrast!
Of course, if the stock went down to $90, or $80, the options could be completely worthless at or before expiration whereas you would maintain most of your investment if you had bought the stock. But your loss is limited to the amount you bet in either case.
There is another and less risky way to get into AAPL more cheaply than buying it outright. Buy deep in the money calls - for example, July $70 calls cost about $50 when AAPL is at $120. But because these are so deep in the money, their price fluctuation is almost identical to the stock price and not hypersensitive to a $5 dip as a $115 option would be. In short, you can spend $7,000 instead of $12,000 to control the same number of shares (100), and if the stock goes up your upside gain can be great.
One further elaboration is buying puts as insurance on the shares you own (this is really what options are for). Let's say, AAPL is at $120 and you own 1,000 shares. Your investment is valued at $120,000. You can buy July $100 puts at roughly $0.65. You purchase 10 of those as insurance to cover your investment for (10)(0.65)(100) = $650.
If AAPL stays at $120 or higher through the expiration on July 20, your puts (insurance) expire worthless. Not unlike that life insurance or auto collision insurance that you have. But let's suppose it turns out that the iPhone is delayed by a court injunction or something terrible happens and the stock loses a quarter of its value, plunging to $90 a share.
Without the covering puts, your investment went from $120K to $90K, a $30K loss. With the covering puts, your shares have the same loss, but your puts are now worth $10 each. So you gain $10,000 (less the $650 you spent as your insurance premium), and your net loss is only $21.65K. And if had ponied up $1,950 to buy 30 covering puts, your net loss would only have been that $1,950!
Wow, this is too lengthy already. Stop/loss is another way to lock in gains if the stock starts to tank. Look it up on any investment site.
Standard "not an investment broker/adviser, you may lose everything" disclaimers here. There are plenty of basic stock investing sites that discuss options in detail, and you should go read up on those before trying anything like this of course.
Like certain anatomical parts, everyone has an opinion. Personally, I see aapl doubling in a year or so. With 2008 e/s estimates from 5 to 7, and applied PE of 30 to 40, you do the math. But it won't be pretty. The big hedge funds love aapl and move it all over the place making $$$ almost daily. Even at today's price it's a good longterm buy (IMHO). Just ignore the fluctuations. There very well may be a dip around iphone release, but with earnings coming, leopard, new macs, and everyone predicting a dip, it may never really happen (at least much below this level). It may be riskier to wait than to just go ahead and buy now. BTW, I know someone who always wanted to pick up an oceanfront lot/cottage at the Jersey shore, but was just waiting for the right dip in land prices. That was 40 years ago. Still waiting for that right dip.
When looking at market valuation, there's a lot of questions one has to ask before concluding it's either too high or too low. For a growing company, the market cap is always going to be greater than the company equity. So, the question is, is Apple growing, and if so, how much will it grow in the future. Since apple has 2 core products, the ipod and the mac, one has to look at the growth potential in each area. One question to ask, when is the iPod market going to be saturated. I think it could be anywhere between 20M/yr to 150M/yr (in the U.S. that is). On the high end, every other person in the US will buy a new iPod each yr. On the other hand, Apple's growth potential in the Personal Computer industray is, in my opinion, much greater. And of course there is the iPhone, but I won't make any predictions until it has been on the market for a while. $100 Billion sharholder's equity can defenitely be reached. I'd say withing the next 10 yrs or so.
I am laughing now remembering how much I wanted to buy stock with it was in the low double digits and couldn't find enough cash to make it worthwhile. At least I make myself feel better knowing I should have.
Back in the first half of the 90s, I made a move into graphic design which got me out of a totally soul-destroying job. Essentially, Apple saved my sanity and I genuinely felt that I ought to buy some stock to acknowledge that fact, and show some support for a company that had made a significant difference to my life.
Unfortunately, I was really strapped for cash and and couldn't scrape together the requiste $14 per share.
Bah!
Jim
That's exactly what I thought too
I loves me some Doctor Evil.
BTW, does anybody remember that Apple was worth $4.7bn at one point four years ago when it had $4.1bn in cash? I much prefer it like this though
If you have any money to invest this is still a good time to invest in Apple.
In five years you will look back and wonder why you did not buy it 120 when it selling for $200 post 2 splits.
Owning stock is like owning a home. If it is a solid company it will do well in the long run. If the house is affordable for you income and in a descent part of town it will do appreciate in 20 years.
In five years you will look back and wonder why you did not buy it 120 when it selling for $200 post 2 splits.
Owning stock is like owning a home. If it is a solid company it will do well in the long run. If the house is affordable for you income and in a descent part of town it will do appreciate in 20 years.
I like looking at stocks like this... It's merely the stock price since late February 2007 times -1. I do this because humans tend to have an aversion to things they see as losses, and over-exuberent towards gains. In this graph, would you think that the stock will continue going down...or is it time for a reversal?
If I could sell short...I would (I think it's time for a reversal).
If I could sell short...I would (I think it's time for a reversal).
Attachments
BTW, does anybody remember that Apple was worth $4.7bn at one point four years ago when it had $4.1bn in cash? I much prefer it like this though
If memory serves, AAPL's market cap was actually lower than the company's cash reserves at one, grim point.
Actually aapl's market cap five years ago was 3 Billion. So increased 30 fold in five years. We should increase 10 fold in 5 more years putting our Market Cap at 1 trillion.
why oh why didn't I but AAPL a year or so ago ...
Bought in @ $72
although I had been watching the price since it was around $24 or so. I would have bought earlier but I didn't know that I could by US stocks cie est la vie
(such is life)
Ok, so does this mean Apple can finally compete with Microsoft's Zune now?
[/sarcasm]
Seriously, hooray for Apple. Glad to know they're not just alive and kicking, but healthy as well.
[/sarcasm]
Seriously, hooray for Apple. Glad to know they're not just alive and kicking, but healthy as well.
Sounds like good advice, not that I understand three-quarters of what you said, but then I readily admit I just don't understand most of the concepts of how things work in the stock market, much like I just can't seem to comprehend how music works (that is, how a C sharp can also be a B flat, and so forth).
Anyhow, thanks for your post. It's most cool to know one can still make money on Apple!