AAPL - Apple Inc.

[stahleyp]

well, it's sad for these people, but maybe worth a read.

 

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/?iid=s_mpm

[enoch01]

well, it's sad for these people, but maybe worth a read.

 

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/?iid=s_mpm

 

Capitulation time.

[Guest valueInv]

A very good description of people's views on Apple:

 

"[Apple]’s always been the proverbial bumblebee: it shouldn’t be able to fly but it does."

 

"The bumblebee analogy is more apt than Surowiecki details. The reason this myth started was because people tried to apply formulas to bees that weren’t apt. Just like a bee is not a fixed-wing aircraft, Apple is not a steady growth company like Johnson & Johnson, or a market-share chaser like Amazon."

 

http://www.macworld.com/article/2029830/macalope-a-fundamental-disconnect.html

 

[siddharth18]

well, it's sad for these people, but maybe worth a read.

 

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/?iid=s_mpm

 

Thank you for the link. I read the article in its entirety and also some of the comments.  It serves as a sobering reminder and (is actually sanity-restoring). It is sad to see so many folks that were suckered into the casino (options market) by someone who stridently projected his skill, when in fact, his skill was nothing more than his sheer luck.

 

He had been right in the past, although with the benefit of hindsight, not for all the right reasons. And when things went awry, him and his followers had nothing to fallback on. As they say - "Never confuse genius with a bull market."

 

Even worse is the fact that a lot of his followers broke the cardinal rule of investing: Never to put all of your capital in a single idea/stock/option.

 

"The deleterious effect of permanent capital loss on portfolio returns cannot be overstated" ~Michael Burry.

[premfan]

well, it's sad for these people, but maybe worth a read.

 

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/?iid=s_mpm

 

Thank you for the link. I read the article in its entirety and also some of the comments. It is sad to see so many folks that were suckered into the casino (options market) by someone who stridently projected his skill, when in fact, his skill was nothing more than his sheer luck.

 

+1

[Parsad]

well, it's sad for these people, but maybe worth a read.

 

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/?iid=s_mpm

 

Sad, but that guy was a moron who took inordinate amounts of risk.  Why is it so damn hard for us to raise capital, when an idiot like that has no problem? 

 

We've batted about 70% on our ideas over time and held an average of 35% cash.  We've outperformed 99% of our peers over the last six years with no leverage, no debt, no shorting, and less correlation to the market than the industry.  For our size, our fund's expenses are extremely low and getting lower each year.  We are only compensated when we achieve a 6% annual hurdle with a high watermark.  Our fund is at all-time highs as I speak, and we've got a ton of liquidity.  We write no articles or books, don't do interviews, and the only place we say anything is on this board. 

 

We are so far from the common industry hedge fund manager or private equity firm, yet I can barely get someone to give our fund a sniff, and this asshole raises so much money and does so much damage to his investors!  Cheers!

[Parsad]

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?

 

We don't get comfortable with sectors, as much as specific businesses.  For example, we owned WFC and BAC, but we never touched C or JPM.  We also don't really invest like Buffett or Munger.  We're really old-school, Ben Graham type of investors...margin of safety, net-nets, liquidation value, arbitrage, distressed debt, activist/catalysts.  We even partake in a bit of short-term speculation through call options from time to time. 

 

We don't fall in love with any stock, even though my posts may sound like it at times.  No stock is permanent in our holdings, unless it is one we have some control over, and so far there aren't any we control...one day though.  A stock is purchased below intrinsic value (we average in until it hits bottom) and we sell as it gets closer to intrinsic value (average out). 

 

When most other people are asleep or playing with their kids, I'm reading, researching or just thinking about our holdings and what could happen to those businesses...I also read almost every post on this board every day of the week.  Vacation is having dinner with a friend or family member while I'm at a Pabrai Funds meeting or Fairfax meeting.  So over time the circle just gets bigger!  We'll only bet on businesses we are comfortable with, no matter who else is buying, selling, or calling us a fool.  Cheers!     

[Liberty]

Sounds like a very sane approach, Parsad. Refreshing!

[Sullivcd]

Wow..new 52-week low..trading at 6.5x earnings net of cash!!

 

How do you get to 6.5x? Close at 420-42 in cash=378/44(ttm)=8.5x

[Mephistopheles]

Wow..new 52-week low..trading at 6.5x earnings net of cash!!

 

How do you get to 6.5x? Close at 420-42 in cash=378/44(ttm)=8.5x

 

Cash per share is roughly 140

[Guest valueInv]

well, it's sad for these people, but maybe worth a read.

 

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/?iid=s_mpm

 

Sad, but that guy was a moron who took inordinate amounts of risk.  Why is it so damn hard for us to raise capital, when an idiot like that has no problem? 

 

We've batted about 70% on our ideas over time and held an average of 35% cash.  We've outperformed 99% of our peers over the last six years with no leverage, no debt, no shorting, and less correlation to the market than the industry.  For our size, our fund's expenses are extremely low and getting lower each year.  We are only compensated when we achieve a 6% annual hurdle with a high watermark.  Our fund is at all-time highs as I speak, and we've got a ton of liquidity.  We write no articles or books, don't do interviews, and the only place we say anything is on this board. 

 

We are so far from the common industry hedge fund manager or private equity firm, yet I can barely get someone to give our fund a sniff, and this asshole raises so much money and does so much damage to his investors!  Cheers!

It's the power of marketing, Parsad. If you look closely, Buffet is a brilliant marketer. Haven't studied Prem as much, but I'm willing to bet he is too. Think about the Buffet, Watsa brand.

[Parsad]

well, it's sad for these people, but maybe worth a read.

 

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/?iid=s_mpm

 

Sad, but that guy was a moron who took inordinate amounts of risk.  Why is it so damn hard for us to raise capital, when an idiot like that has no problem? 

 

We've batted about 70% on our ideas over time and held an average of 35% cash.  We've outperformed 99% of our peers over the last six years with no leverage, no debt, no shorting, and less correlation to the market than the industry.  For our size, our fund's expenses are extremely low and getting lower each year.  We are only compensated when we achieve a 6% annual hurdle with a high watermark.  Our fund is at all-time highs as I speak, and we've got a ton of liquidity.  We write no articles or books, don't do interviews, and the only place we say anything is on this board. 

 

We are so far from the common industry hedge fund manager or private equity firm, yet I can barely get someone to give our fund a sniff, and this asshole raises so much money and does so much damage to his investors!  Cheers!

It's the power of marketing, Parsad. If you look closely, Buffet is a brilliant marketer. Haven't studied Prem as much, but I'm willing to bet he is too. Think about the Buffet, Watsa brand.

 

I agree. Buffett is a superb marketer, and one of the best in the hedge fund industry is actually Mohnish.  Prem actually kept a very low profile for many, many years...just slowly went about his business.  It wasn't until their run in with the shorts in 2003, where he had to raise his public profile and start doing conference calls, so that shareholders started to get accurate information.  Cheers! 

[Sullivcd]

Wow..new 52-week low..trading at 6.5x earnings net of cash!!

 

How do you get to 6.5x? Close at 420-42 in cash=378/44(ttm)=8.5x

 

Cash per share is roughly 140

 

Thanks meph, damn you yahoo.

[Mephistopheles]

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!

 

Count me in! I continued to buy BAC as it hit $5. My average cost is $7. But I didn't invest nearly as much as I should have nor did I leverage the position at all (through options or warrants). I know exponentially more about investing now than I did then, and I'd kill for another opportunity as good as that one.

 

Also, I picked up some AAPL today.

[Mephistopheles]

Wow..new 52-week low..trading at 6.5x earnings net of cash!!

 

How do you get to 6.5x? Close at 420-42 in cash=378/44(ttm)=8.5x

 

Cash per share is roughly 140

 

Thanks meph, damn you yahoo.

 

Lol np. Yahoo is not wrong, but a bulk of their cash is listed under "long term investments", I'm guessing you didn't add that in?

[Sullivcd]

Wow..new 52-week low..trading at 6.5x earnings net of cash!!

 

How do you get to 6.5x? Close at 420-42 in cash=378/44(ttm)=8.5x

 

Cash per share is roughly 140

 

Thanks meph, damn you yahoo.

 

Lol np. Yahoo is not wrong, but a bulk of their cash is listed under "long term investments", I'm guessing you didn't add that in?

 

I was being lazy and just went to the key stats page where it shows 42.40 cash per share with no debt.

[Mephistopheles]

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. 

 

I have been thinking about playing with the options too, by selling puts. One thing that concerns me though, is if AAPL decides to issue a large one-time dividend (like MSFT did a few years back), then those who are short puts/long calls might get screwed. Can anyone else weigh in on this?

[Sullivcd]

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. 

 

I have been thinking about playing with the options too, by selling puts. One thing that concerns me though, is if AAPL decides to issue a large one-time dividend (like MSFT did a few years back), then those who are short puts/long calls might get screwed. Can anyone else weigh in on this?

 

The contracts should adjust to reflect the special dividend. Section 11 governs adjustments:

 

http://www.optionsclearing.com/components/docs/legal/rules_and_bylaws/occ_bylaws.pdf

 

[Palantir]

well, it's sad for these people, but maybe worth a read.

 

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/?iid=s_mpm

 

Sad, but that guy was a moron who took inordinate amounts of risk.  Why is it so damn hard for us to raise capital, when an idiot like that has no problem? 

 

We've batted about 70% on our ideas over time and held an average of 35% cash.  We've outperformed 99% of our peers over the last six years with no leverage, no debt, no shorting, and less correlation to the market than the industry.  For our size, our fund's expenses are extremely low and getting lower each year.  We are only compensated when we achieve a 6% annual hurdle with a high watermark.  Our fund is at all-time highs as I speak, and we've got a ton of liquidity.  We write no articles or books, don't do interviews, and the only place we say anything is on this board. 

 

We are so far from the common industry hedge fund manager or private equity firm, yet I can barely get someone to give our fund a sniff, and this asshole raises so much money and does so much damage to his investors!  Cheers!

 

On that note, there is a MF manager who works near where I live, and he charges > 2% in expenses (FOR A MUTUAL FUND), and has 10M.

 

And he underperforms.

 

 

Also, have you considered becoming an RIA with managed accounts? There is a good value investment shop in my town, and they do that, run a value equity strategy for managed accounts.

[ERICOPOLY]

Writing an at-the-money 2015 put and using the proceeds to purchase calls would give you 1.22x leverage.

 

Or you could buy the common and get no leverage, same downside risk.

 

 

[ragnarisapirate]

Here is a question that I have... (and I have not done a lick of research on this, it just kind of seems like it could work)

 

Since AAPL and a lot of other companies have cash trapped overseas that can't come back to the US w/o some bad tax consequences, why don't they just set up some sort of investment wing/account in said cash trapped areas to buy it's own stock with? Then, they could either retire the shares or carry them on the books in the same way that BH carries shares of BH that are held in The Lion Fund.

 

It seems that this would be a way to return cash to shareholders and get around some red tape? Would buying the shares be considered an event where the cash would be coming back to the US?

[Parsad]

Here is a question that I have... (and I have not done a lick of research on this, it just kind of seems like it could work)

 

Since AAPL and a lot of other companies have cash trapped overseas that can't come back to the US w/o some bad tax consequences, why don't they just set up some sort of investment wing/account in said cash trapped areas to buy it's own stock with? Then, they could either retire the shares or carry them on the books in the same way that BH carries shares of BH that are held in The Lion Fund.

 

It seems that this would be a way to return cash to shareholders and get around some red tape? Would buying the shares be considered an event where the cash would be coming back to the US?

 

They could do that, but that wouldn't be retiring shares.  They would just be investments.  To retire the shares, the capital has to be repatriated.  But yes, that is an option.  If they believe their shares are the best use of capital, then they can just buy shares through their offshore entities.  Cash would just continue to accumulate in those entities though, as dividends would just be paid to them.  Cheers!

[siddharth18]

well, it's sad for these people, but maybe worth a read.

 

http://tech.fortune.cnn.com/2013/03/04/apple-zaky-bullish-cross/?iid=s_mpm

 

Sad, but that guy was a moron who took inordinate amounts of risk.  Why is it so damn hard for us to raise capital, when an idiot like that has no problem? 

 

We've batted about 70% on our ideas over time and held an average of 35% cash.  We've outperformed 99% of our peers over the last six years with no leverage, no debt, no shorting, and less correlation to the market than the industry.  For our size, our fund's expenses are extremely low and getting lower each year.  We are only compensated when we achieve a 6% annual hurdle with a high watermark.  Our fund is at all-time highs as I speak, and we've got a ton of liquidity.  We write no articles or books, don't do interviews, and the only place we say anything is on this board. 

 

We are so far from the common industry hedge fund manager or private equity firm, yet I can barely get someone to give our fund a sniff, and this asshole raises so much money and does so much damage to his investors!  Cheers!

 

Of course capital raising is a "popularity contest" as described by Dr. Burry in his 2001 investor's letter. Buffet is both a brilliant marketer as well as a brilliant capital allocator. Recall from his biography (Snowball) that he took the Dale Carnegie course in order to improve his public speaking that would ultimately help him raise money from his family/friends/neighbors.

 

The best example of a brilliant marketer but a mediocre capital allocator is Whitney Tilson. His endless conference hosting, blog posting and ramblings seems to have earned him enough of a following even while his returns continue to slumber.

 

The best example of brilliant capital allocator but mediocre marketer is Mike Burry. He was, arguably, the best investor yet somehow failed to keep his investors from leaving his fund even when his fund posted a triple digit return in a year when the markets were crashing.

 

Even Bill Ackman has a sort of the "cool factor" and the "holier and smarter than thou" personality that I'm sure helps him raise money for his fund.

 

So yes, one needs both in order to succeed mightily although given the choice just to pick one, capital allocation is obviously the superior.

[ragnarisapirate]

Here is a question that I have... (and I have not done a lick of research on this, it just kind of seems like it could work)

 

Since AAPL and a lot of other companies have cash trapped overseas that can't come back to the US w/o some bad tax consequences, why don't they just set up some sort of investment wing/account in said cash trapped areas to buy it's own stock with? Then, they could either retire the shares or carry them on the books in the same way that BH carries shares of BH that are held in The Lion Fund.

 

It seems that this would be a way to return cash to shareholders and get around some red tape? Would buying the shares be considered an event where the cash would be coming back to the US?

 

They could do that, but that wouldn't be retiring shares.  They would just be investments.  To retire the shares, the capital has to be repatriated.  But yes, that is an option.  If they believe their shares are the best use of capital, then they can just buy shares through their offshore entities.  Cash would just continue to accumulate in those entities though, as dividends would just be paid to them.  Cheers!

 

Thanks for the clarification.

 

As a hypothetical: What happens if AAPL would buy up every single share of stock, but do so in offshore accounts? Maybe not every share, but a very large number of them... Say, oh, 1/2? It seems that if the offshore entity owned the bulk of the stock that would get into really weird accounting.

 

[DynamicPerception]

Exxon Mobil Corporation (XOM) back to Number One in terms of market capitaization - $400B.

Apple Inc. (AAPL) back to Number Two - $394B.

Apple has dropped around $308B in a relatively short time, simply amazing.