I'd honestly like to know the specific stocks you see as "much better" value plays? Apple is cheap by any measure, particularly ex-cash.
I hope you'll understand, but I'd rather not take the intellectual property I work very hard to produce and just give it out. What I will tell you is that I build quantitative models to create long-short portfolios, and valuation is one of the inputs to those models. The universe of investable and (relatively) liquid US equities is quite large, starting with the Russell 3000 and then some beyond that. I rank order all equities, both absolutely and within their industries and sectors, according to each metric.
You can relatively easily reproduce this much yourself, and you'll find the inescapable conclusion that you really can't call Apple "cheap." Pick maybe a half dozen valuation metrics. Make them somewhat diverse, and it honestly won't even matter which ones you pick. Weight them evenly, or skew them a little one way or another. That won't affect things either. Then
randomly pick, say, 20 companies from the Russell 3000 over whatever arbitrary time period you want. Find out how those companies rank (this may be trickier for an outsider to do). Compute your average.
Now do it for Apple. You'll find it in the middle of the pack.
Which is exactly what you should find in an efficient market with the most covered company in the world.
I am long all stocks because I will always be right in the end. There are other wonderful companies which I own, but AAPL can make the case they are the best company in the world.
We could argue about the "best company in the world" bit. (I don't even necessarily disagree with this. I haven't given that question any thought.) But the best company is not necessarily the best
investment.
The "jury is out" on literally every company. If you wait until the end of time, they might all be bankrupt, merged, or acquired.
This is a straw man argument since I said we should wait until the next earnings release, which is significantly before the end of time.
The point is, with what we know today, AAPL is cheap and they guided for their best quarter ever. I also think they will sell the most iPhones ever in FQ1. They won't break out mix, but would you like to take that internet bet? Bragging rights. Deal? Or maybe you also agree they'll post the most iPhone sales ever in a quarter?
I mean, sure we could do a bet for kicks, but the truth is I have no idea. The answer—and more importantly the explanation, and whether to call it a "success"—will depend on a lot of factors including several that are entirely external to Apple. Consider:
- What's the price elasticity of demand look like (a huge question for the X)?
- What does consumer confidence look like, and how is that translating to holiday discretionary spending? (This speaks to the success of the device relative to an appropriate baseline).
- What does the competition do? (Is the X "successful" relative to its peers?)
- What percent of sales are generated by the almost-automatic upgrades that more and more people have already bought into with monthly payment plans with Apple or their carrier—a relatively new but growing phenomenon that "locks in" a lot upgrades even if a new device is underwhelming?
In short, there are lots of factors and even more possible explanations behind them. And regardless of what happens, people can and will argue until the cows come home about those possible explanations.
As I said to another poster, I think a reasonable hypothesis is that we will see a YOY decline in units sold but a significant increase in revenue and gross profit. Would I be surprised if we see a YOY increase in units sold though? Not one bit.
Nonsense post...you're not even trying to make reasonable points. You're just saying "good luck" when AAPL is at an all time high and every product is firing on all cylinders. When the facts change, I'll change. Right now, you're just a hater/bear if you are betting against Apple or trying to say they are doing anything but incredibly well.
I think you misunderstood him. He wasn't being a "hater." He was talking about investors being lucky, not Apple itself.
Also, you've glossed over a crucial point I previously made about the overall market and comparable companies. Properly analyzing a stock's returns requires subtracting out the risk-adjusted return of the market at a minimum (and typically other factors--see the Fama-French research) and only then looking at the residual. You can't just say "all time high" and regard that as some measure of great success.
Further, over the last two years, you can find plenty of other names that have matched or even beaten Apple. A couple of the large caps are AMZN and MSFT. And the story is worse when you look at the full slate of investable US equities. Despite those returns that look so good to you, did you know that
Apple isn't even in the top third of equities with respect to price appreciation over the last half year?
I've read it. Over 75% of my net worth is in index funds, not individual stocks. Stock picking is literally impossible, no disagreement there.
I wouldn't say literally impossible. There are hedge fund managers who have done it year-in year-out for a couple decades. Probabilistically, we can say it's nearly impossible that can be attributed to luck. My long-short portfolio has been nothing short of amazing over the last several years (not even taking into account the bull market, which should cause me to underperform), but I'm smart enough that I know I cannot definitely attribute X% to skill and (100-X)% to luck.
I have 0 obsession with P/E ratios and know exactly what they mean. All the other metrics you listed have merits and I'm familiar with those too. FCF has its own issues as items like R&D can detract from the numbers, but not tell you the company is still more profitable.
There is no one metric that defines stock valuations, which is what makes this so fun!
If you aren't fixated on PE ratios, then I'm curious what exact metrics led you to your original premise.
Yes, there isn't one metric, which is why I cited several...and across most, Apple is in the middle of the pack. That's very much at odds with your claim that Apple is "cheap by any measure."
Apple is quality, no question about that. Whether you think it's cheap or not is your prerogative, but it's certainly not expensive by any measure, particularly with interest rates and other stock valuations. As Buffett says, the 10 year is trading at 40X earnings and stocks are the only game in town for the moment.
It isn't prerogative. It's numbers. "Certainly not expensive" isn't the same thing as "cheap."
I think you're making the mistake of comparing Apple to a handful of other big name growth plays rather than the entire pool of equities. That easily could lead you to the incorrect conclusion that Apple is cheap. But unless you are managing a very large fund or investing substantially in one or more very large funds, a much larger pool of equities is at your disposal. Liquidity concerns become less of an issue as AUM shrinks.
