AAPL - Apple Inc.

[premfan]

I understand what you're saying, but saying "discount to IV" is the ONLY thing also leads to disappointing investments like HPQ, Dell, and Loews. I'm sure a lot of value investors were buying Dell and HPQ.

 

You have to continue to average in.  Look at Prem and RIMM.  If Prem didn't average in, RIMM would have been a bust.  And if you believe your own analysis, your bets have to get bigger each time you buy as the price drops.

 

You cannot predict the bottom, and when people say "wait till there is support", my eyes start rolling...sorry!  ::)  Cheers!

 

With all due respect mr. chairman. I'm using Michael burry's mental model on irrational selling courtesy of Tariq ali . The model of Michael burry is attached below.

 

 

As you know, I have a simple philosophy: sell on new lows.

There are two reasons for this:

1) Many people do this. It’s a self-fulfilling prophecy. I try to do it quicker.

2) If I know something is a fundamental value and it breaks to new lows, the selling is irrational by definition and I don’t want to be in the way of irrational selling. Better to wait for the buyers to show where they are willing to step up and give support.

 

I suffered for several years trying to be stubborn in the face of irrational selling and all it got me was a lot of 50% haircuts on stocks that had already been too cheap. One of the biggest lessons I’ve learned was that PE 8 stocks can become PE 4 stocks and stay that way for a long time. AT&T’s long-distance business is getting close to trading for 1X EBITDA, yet everyone looks at it like this big albatross around T’s neck. Maybe in the future I’ll get the long-distance biz for free. All we need is another $15 billion in lost market cap.

 

That said, I love your rhetorical questions. Why do you think AT&T is getting hit?

 

Mike

 

[texual]

I wouldn't get into this company again under any circumstances. They got a little too close to the sun and you know that nobody ever goes back to the sun.

 

But I was a owner from 2004 to 2010 and missed out on two more years of rising stock when I cashed out. I felt really lousy but stuck to my thesis. It still stands to me that apple isn't going to be the hit it was in prior years. I like Tim cook but I don't think he has any tricks up his sleeve. If he does I'd still not want the stock unless it hit like 200

[nkp007]

Could be cheap, could not be.

 

Anyone else permanently scarred by Research in Motion (Blackberry)?

[Parsad]

I love it!  When sentiment is like this on a value message board, and something is starting to get cheaper and cheaper, it's just completely irrational.  I hope it keeps sinking, because I'll keep buying more and more. 

 

No one wanted to buy BAC on here at the bottom.  I think I can count on one hand all of the people who bought at $5.50 or less.  Apple isn't that cheap, but it is getting cheaper...it has none of the legacy issues that BAC had, no debt, robust cash flows, a cult following and a ton of cash to buy back stock with no restrictions on capital allocation...it should never get as cheap as BAC did and probably won't.  Cheers!

[compoundinglife]

I understand what you're saying, but saying "discount to IV" is the ONLY thing also leads to disappointing investments like HPQ, Dell, and Loews. I'm sure a lot of value investors were buying Dell and HPQ.

 

You have to continue to average in.  Look at Prem and RIMM.  If Prem didn't average in, RIMM would have been a bust.  And if you believe your own analysis, your bets have to get bigger each time you buy as the price drops.

 

You cannot predict the bottom, and when people say "wait till there is support", my eyes start rolling...sorry!  ::)  Cheers!

 

Palantir,

 

I agree with Sanjeev. Value investors rarely get in at the bottom or get out at the top but by averaging in and out you can get a very suitable return. I understand from previous posts that you (correct me if I am wrong) are working with a relatively fixed amount of capital or at least don't have regular cash inflows. If that is the case it can make averaging in and out hard unless you keep a decent position in cash. But something to consider when initiating positions. You will sometimes buy your first part of the position at the top and sometimes buy it on the way down, but over time it works out quite well IMO. You can't always get the bottom.

 

The following is an observation based on your posts in various threads and I don't want you take it personally, its meant to be constructive feedback. But you seem to very concerned in a lot of cases with short term market opinion and things other than what you are getting for your dollar. You are young and will have no problem getting rich if you just focus on buying stuff at a discount to IV. Again, I only mention this because I think over the long run it will benefit you tremendously to be able to filter out the rest. Just my 2 cents.

[hyten1]

i want it cheaper

[Parsad]

i want it cheaper

 

Don't we all!  ;D  I'd like it at $200/share!  Cheers!

[nkp007]

i want it cheaper

 

The lesson I got from Research in Motion (not that this is the case here, but still relevant):

 

I bought at approximately 9x earnings which was at peak earnings. The earnings over the next few quarters (tech erosion happens so quickly) dropped dramatically and in a free-fall the likes of which I've never seen before. The "moat" that everyone thought was so invulnerable disintegrated within four quarters. This was a year after peak earnings.

 

It was sick. It likely won't happen here, but that's one of the reasons I'm staying away. This type of tech changes too quickly for its own good.

[hyten1]

nkp007

 

i hear ya and agree, that is one of the reason why i want it cheaper (other than just like cheap things in general)

 

tech can change so fast, especially consumer related stuff, not saying it'll happen here, but just being cautious.

 

hy

[LC]

Anyone else permanently scarred by Research in Motion (Blackberry)?

Whenever I read or hear something along this line, I just constantly repeat the wise words of Charlie Munger, that if you can't stomach 50% declines in the price of your stock, you aren't suited for common stock investments and will deserve the mediocre results you achieve.

 

Not directed at you or anyone in particular, but it's a mental tool I use to realize that no matter how badly one was burned in the past, each situation can be approached differently.

[stahleyp]

The problem with technology is that is so hard to understand where it will be 10 or even 3 years from now. Apple is undeniably cheap based on traditional metrics compared to growth. But man, I just don't know. Look at Sony. They had the cool factor for a long time and then lost it. Now, the main guy, Jobs, who determined most of the cool factor is gone. Apple was terrible without him the first time around. We'll see where it goes from here. Good luck to the longs!

[lessthaniv]

I understand what you're saying, but saying "discount to IV" is the ONLY thing also leads to disappointing investments like HPQ, Dell, and Loews. I'm sure a lot of value investors were buying Dell and HPQ.

 

You have to continue to average in.  Look at Prem and RIMM.  If Prem didn't average in, RIMM would have been a bust.  And if you believe your own analysis, your bets have to get bigger each time you buy as the price drops.

 

You cannot predict the bottom, and when people say "wait till there is support", my eyes start rolling...sorry!  ::)  Cheers!

 

The example of their purchase of International Coal (in shareholder's letter)  should be required reading for any commerce student.

[compoundinglife]

i want it cheaper

 

The lesson I got from Research in Motion (not that this is the case here, but still relevant):

 

I bought at approximately 9x earnings which was at peak earnings. The earnings over the next few quarters (tech erosion happens so quickly) dropped dramatically and in a free-fall the likes of which I've never seen before. The "moat" that everyone thought was so invulnerable disintegrated within four quarters. This was a year after peak earnings.

 

It was sick. It likely won't happen here, but that's one of the reasons I'm staying away. This type of tech changes too quickly for its own good.

 

IMO this is a circle of competence issue. In 2009 (stock price in the 60s) I was at Complete Growth Investor, a conference in Las Vegas and told quite a few of the RIM bulls and the person presenting RIM as an idea that their perceived moat of RIM's superior security was completely wrong and Apple/Android would kill them. It didn't seem like anyone believed me.

 

A lot of the people/analysts who have touted RIM's security as a differentiator didn't truly understand information security and unfortunately convinced a lot of other people that it was a solid moat. 

 

There are a lot of people with this in their circle of competence that saw thing coming long before the stock price reflected it.

 

[nkp007]

Anyone else permanently scarred by Research in Motion (Blackberry)?

Whenever I read or hear something along this line, I just constantly repeat the wise words of Charlie Munger, that if you can't stomach 50% declines in the price of your stock, you aren't suited for common stock investments and will deserve the mediocre results you achieve.

 

Not directed at you or anyone in particular, but it's a mental tool I use to realize that no matter how badly one was burned in the past, each situation can be approached differently.

 

I've invested in companies that have dropped 50% or more from my initial investment (Bank of America).

 

The problem with RIMM was that the decline was the result of a permanent impairment in the business and it took me too long to figure that out.

[Palantir]

 

I agree with Sanjeev. Value investors rarely get in at the bottom or get out at the top but by averaging in and out you can get a very suitable return. I understand from previous posts that you (correct me if I am wrong) are working with a relatively fixed amount of capital or at least don't have regular cash inflows. If that is the case it can make averaging in and out hard unless you keep a decent position in cash. But something to consider when initiating positions. You will sometimes buy your first part of the position at the top and sometimes buy it on the way down, but over time it works out quite well IMO. You can't always get the bottom.

 

The following is an observation based on your posts in various threads and I don't want you take it personally, its meant to be constructive feedback. But you seem to very concerned in a lot of cases with short term market opinion and things other than what you are getting for your dollar. You are young and will have no problem getting rich if you just focus on buying stuff at a discount to IV. Again, I only mention this because I think over the long run it will benefit you tremendously to be able to filter out the rest. Just my 2 cents.

 

I do see the rationale behind what you're saying. It may not capture the bottom or the top, but will do well over time, and I do suppose that my hesitation is primarily driven by only being able to invest a fixed amount.

 

I respect your opinion, and I agree that I come across as very short term oriented, it is a bad habit I'm slowly working myself out of, thanks in no small part to a few losses.

[Guest bengrahamofthenorth]

I'm not jumping in anytime soon. I totally see how this falls apart. Apple's margins are crazy high and their ecosystem is being eroded by android which is given away for free. It is very possible Apple hits peak profitability this year. Without some new products margins will continue to erode. This is not RIM but there are some serious similarities here. Using PE ratio ignores the reality that margins could be under serious pressure very soon.

[compoundinglife]

 

I agree with Sanjeev. Value investors rarely get in at the bottom or get out at the top but by averaging in and out you can get a very suitable return. I understand from previous posts that you (correct me if I am wrong) are working with a relatively fixed amount of capital or at least don't have regular cash inflows. If that is the case it can make averaging in and out hard unless you keep a decent position in cash. But something to consider when initiating positions. You will sometimes buy your first part of the position at the top and sometimes buy it on the way down, but over time it works out quite well IMO. You can't always get the bottom.

 

The following is an observation based on your posts in various threads and I don't want you take it personally, its meant to be constructive feedback. But you seem to very concerned in a lot of cases with short term market opinion and things other than what you are getting for your dollar. You are young and will have no problem getting rich if you just focus on buying stuff at a discount to IV. Again, I only mention this because I think over the long run it will benefit you tremendously to be able to filter out the rest. Just my 2 cents.

 

I do see the rationale behind what you're saying. It may not capture the bottom or the top, but will do well over time, and I do suppose that my hesitation is primarily driven by only being able to invest a fixed amount.

 

I respect your opinion, and I agree that I come across as very short term oriented, it is a bad habit I'm slowly working myself out of, thanks in no small part to a few losses.

 

As Munger says, "I know I'll perform better if I rub my nose in my mistakes. This is a wonderful trick to learn." I feel like I have learned much more from my losses than my gains in both financial and non-financial aspects of life.

 

[Guest valueInv]

I love it!  When sentiment is like this on a value message board, and something is starting to get cheaper and cheaper, it's just completely irrational.  I hope it keeps sinking, because I'll keep buying more and more. 

 

No one wanted to buy BAC on here at the bottom.  I think I can count on one hand all of the people who bought at $5.50 or less.  Apple isn't that cheap, but it is getting cheaper...it has none of the legacy issues that BAC had, no debt, robust cash flows, a cult following and a ton of cash to buy back stock with no restrictions on capital allocation...it should never get as cheap as BAC did and probably won't.  Cheers!

I bought BAC at 5 and am continuing to add Apple. Bought some more today and last week.

[Guest valueInv]

i want it cheaper

 

The lesson I got from Research in Motion (not that this is the case here, but still relevant):

 

I bought at approximately 9x earnings which was at peak earnings. The earnings over the next few quarters (tech erosion happens so quickly) dropped dramatically and in a free-fall the likes of which I've never seen before. The "moat" that everyone thought was so invulnerable disintegrated within four quarters. This was a year after peak earnings.

 

It was sick. It likely won't happen here, but that's one of the reasons I'm staying away. This type of tech changes too quickly for its own good.

 

IMO this is a circle of competence issue. In 2009 (stock price in the 60s) I was at Complete Growth Investor, a conference in Las Vegas and told quite a few of the RIM bulls and the person presenting RIM as an idea that their perceived moat of RIM's superior security was completely wrong and Apple/Android would kill them. It didn't seem like anyone believed me.

 

A lot of the people/analysts who have touted RIM's security as a differentiator didn't truly understand information security and unfortunately convinced a lot of other people that it was a solid moat. 

 

There are a lot of people with this in their circle of competence that saw thing coming long before the stock price reflected it.

Its a point I've tried to make on this board often. People tend to overestimate their CoC.

 

BTW, I saw the problems with RIMM coming and sold at 140.

[Guest valueInv]

Buffet on Apple:

 

http://tech.fortune.cnn.com/2013/03/04/apple-warren-buffett-cash/

[tombgrt]

I love it!  When sentiment is like this on a value message board, and something is starting to get cheaper and cheaper, it's just completely irrational.  I hope it keeps sinking, because I'll keep buying more and more. 

 

No one wanted to buy BAC on here at the bottom.  I think I can count on one hand all of the people who bought at $5.50 or less.  Apple isn't that cheap, but it is getting cheaper...it has none of the legacy issues that BAC had, no debt, robust cash flows, a cult following and a ton of cash to buy back stock with no restrictions on capital allocation...it should never get as cheap as BAC did and probably won't.  Cheers!

 

I bet you can find 10 of us! I bought BAC at $5.10-ish. Also sold lots at $9.5 and hold only a small position now so that would only be half the story. ;)

 

Anyway, my only problem with AAPL is that it can lose it's cool (and thus it's fat margins and/or sales) very fast. Sometimes the market is right and I'm clueless whether it is now. Same goes for RIMM at this point imo, although in hindsight it was an obvious buy under $8-10.

 

Parsad, how do you get comfortable with some many sectors? You rely heavily on sentiment but do you never fear being wrong on a fundamental basis? SD and AAPL are great examples because a lot is based on assumptions. You can more easily account for very bad scenario's with companies like BAC and still find that you have a MoS imo?

[boilermaker75]

i want it cheaper

 

Don't we all!  ;D  I'd like it at $200/share!  Cheers!

 

At that price you could take AAPL private for $67B minus the FCF flow AAPL takes in between now and when the price would hit 200. If earnings don't fall off the cliff you would get all your cash back within three years and own all of AAPL. Better deal than Michael Dell is getting.

[compoundinglife]

I love it!  When sentiment is like this on a value message board, and something is starting to get cheaper and cheaper, it's just completely irrational.  I hope it keeps sinking, because I'll keep buying more and more. 

 

No one wanted to buy BAC on here at the bottom.  I think I can count on one hand all of the people who bought at $5.50 or less.  Apple isn't that cheap, but it is getting cheaper...it has none of the legacy issues that BAC had, no debt, robust cash flows, a cult following and a ton of cash to buy back stock with no restrictions on capital allocation...it should never get as cheap as BAC did and probably won't.  Cheers!

 

I bet you can find 10 of us! I bought BAC at $5.10-ish. Also sold lots at $9.5 and hold only a small position now so that would only be half the story. ;)

 

 

Add me to the list. $5.1678 was my first batch of common and 2.47 for the warrants on 11/23/2011. I sandbagged the BAC thread, learning from the posters while lurking and buying.

[ERICOPOLY]

I love it!  When sentiment is like this on a value message board, and something is starting to get cheaper and cheaper, it's just completely irrational.  I hope it keeps sinking, because I'll keep buying more and more. 

 

No one wanted to buy BAC on here at the bottom.  I think I can count on one hand all of the people who bought at $5.50 or less.  Apple isn't that cheap, but it is getting cheaper...it has none of the legacy issues that BAC had, no debt, robust cash flows, a cult following and a ton of cash to buy back stock with no restrictions on capital allocation...it should never get as cheap as BAC did and probably won't.  Cheers!

 

I bet you can find 10 of us! I bought BAC at $5.10-ish. Also sold lots at $9.5 and hold only a small position now so that would only be half the story. ;)

 

Anyway, my only problem with AAPL is that it can lose it's cool (and thus it's fat margins and/or sales) very fast. Sometimes the market is right and I'm clueless whether it is now. Same goes for RIMM at this point imo, although in hindsight it was an obvious buy under $8-10.

 

Parsad, how do you get comfortable with some many sectors? You rely heavily on sentiment but do you never fear being wrong on a fundamental basis? SD and AAPL are great examples because a lot is based on assumptions. You can more easily account for very bad scenario's with companies like BAC and still find that you have a MoS imo?

 

I feel the same as you.  My only two highly successful investments came with FFH and BAC.  Both were from the same playbook -- boring businesses that will still be just as relevant in a decade, easy to value so long as management is still good, already turned around but for problems in runoff, runoff clearing quickly. 

 

 

 

[Viking]

Here are some random thoughts:

1.) Who is left to buy an iphone? The smartphone market is forecasted to grow 30% over the next three years. Apple should be able to grow their phone business nicely. The tablet market is forecasted to grow at an even faster rate and Apple has stronger share in tablets. The business is solid.

2.) Is Apple another RIM? When this board got interested in RIM it was after their business had fallen apart and FFH had established a position. As stated above Apple's business is strong. As an example, look at their smartphone or tablet sales and marketshare in Q4. These results were achieved at a time when they are supply constrained (not demand constrained).

3.) Waiting to time the bottom. This may work for many; it does not work for me. Especially with very volatile stocks or stocks where I like to establish a concentrated position. Do what works for you.

4.) What will they do with all that cash? This is the question I have struggled with the most. Fortunately, Mr Market is supplying me with the answer - with the stock selling off it becomes a no brainer for Apple to buy back stock, and a lot of it. Buffett made his views clear and I am sure Apple board members respect his opinion. I would expect Apple will shortly announce a dividend increase and an increase in the stock buyback.

5.) Sentiment is so negative right now I am amazed. It's like someone threw some blood in a pool full of sharks. You can almost taste the fear. Likely a great time to buy (I m backing up the truck).

 

What I need to spend some time on is whether options are a better way to play this thing (to get concentration) - to take a page out of Ericopoly's playbook. I see lots of volatility in apple, similar to FFH in days gone by.