AAPL - Apple Inc.

[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!

 

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.

 

If Apple entities end up owning a signicant amount of the company's own stock, I suspect that certain tax jurisdiction and domicile issues for the parent company would come to the fore.  In other words, Apple could become a company completely domiciled outside of the United States.  That isn't necessarily a problem, as most of their manufacturing is offshore, they are global, and they could still remain listed on U.S. exchanges as an ADR.  Maybe our securities law boardmembers could clarify.  Cheers! 

[Parsad]

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.

 

And that's with Apple making more money than ever and it has a better balance sheet than virtually any other company in the world of its size.  It was overvalued when it was trading at $650 a share, and now the pendulum has swung the other way.  Cheers!

[Mephistopheles]

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!

 

What if they don't pay dividends to those specific shares? Are they legally allowed to do something like that? Or, those shares can be part of a DRIP.

[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?

 

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

 

 

Thanks Sullivcd!

[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!

 

What if they don't pay dividends to those specific shares? Are they legally allowed to do something like that? Or, those shares can be part of a DRIP.

 

They would have to issue another class.  Einhorn's preferred plan is also a good one.  Have the entities buy perpetual preferreds, and then you bring the cash over here, while paying interest back to the entities...which could always be deferred.  Cheers!

[oddballstocks]

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.

 

This is key, you have two things, you're managing a fund and running a business.  The most successful investors are successful marketers and successful business owners.  As an owner you need to focus on raising capital, promote your story.  Your story is great, the little blurb from a few pages back is all you need.  Your investments are successful and you've done well for partners.  Unfortunately people don't know how well you've done if you don't tell them.  I know I had no idea how well your fund has done.

 

I think selling gets a bad rap, selling is a natural thing.  You have something that solves someone else's problem.  Why is it bad to propose something that solves their problem, even if there's a fee?  There are many people in sub-par funds who would benefit if they were in your fund.

 

Maybe I'm inferring, but often an excuse to not sell is that it takes time away from the main activity, in your case investing.  Here's another way to think about it, which is easier, to pick an investment that goes up 50%, or to find a new investor?  If you can find a few new investors in the time it would take to find a new investor you haven't lost anything.  You've actually gained because you can compound that new investor money, and the new money is sure, whereas the investment performance isn't.

 

I don't think you need to go Tilson all out, but a bit of promotion isn't a bad thing, especially if you have results worth promotion.

[ragnarisapirate]

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.

 

This is key, you have two things, you're managing a fund and running a business.  The most successful investors are successful marketers and successful business owners.  As an owner you need to focus on raising capital, promote your story.  Your story is great, the little blurb from a few pages back is all you need.  Your investments are successful and you've done well for partners.  Unfortunately people don't know how well you've done if you don't tell them.  I know I had no idea how well your fund has done.

 

I think selling gets a bad rap, selling is a natural thing.  You have something that solves someone else's problem.  Why is it bad to propose something that solves their problem, even if there's a fee?  There are many people in sub-par funds who would benefit if they were in your fund.

 

Maybe I'm inferring, but often an excuse to not sell is that it takes time away from the main activity, in your case investing.  Here's another way to think about it, which is easier, to pick an investment that goes up 50%, or to find a new investor?  If you can find a few new investors in the time it would take to find a new investor you haven't lost anything.  You've actually gained because you can compound that new investor money, and the new money is sure, whereas the investment performance isn't.

 

I don't think you need to go Tilson all out, but a bit of promotion isn't a bad thing, especially if you have results worth promotion.

 

Ladies and gentlemen... the ever reasonable Nate Tobik. :)

[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!

 

This came from someone where I asked the question on Twitter... Looks like they can't buy their own shares without a repatriation (which, honestly, makes sense from a policy perspective).

 

http://www.irs.gov/irb/2007-25_IRB/ar11.html

 

However, there has been raised a scenario where the company could borrow against their foreign cash in the US, and then buy shares with that money...

[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!

 

This came from someone where I asked the question on Twitter... Looks like they can't buy their own shares without a repatriation (which, honestly, makes sense from a policy perspective).

 

http://www.irs.gov/irb/2007-25_IRB/ar11.html

 

However, there has been raised a scenario where the company could borrow against their foreign cash in the US, and then buy shares with that money...

 

That ruling is based on two foreign subs reorganizing their stakes in another company...but between themselves.  I don't think there is anything to stop the offshore subs from actually just buying stock in Apple.  Not unlike what Mustang and Lion Fund were doing by buying Steak'n Shake stock while they were subs within Steak'n Shake.  Regardless, I'm sure Apple's attorneys are looking for any options possible.  Cheers!

[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

We write no articles or books, don't do interviews, and the only place we say anything is on this board. 

 

 

That's your problem, man! You gotta market yourself. ;)

[rmitz]

This is key, you have two things, you're managing a fund and running a business.  The most successful investors are successful marketers and successful business owners.  As an owner you need to focus on raising capital, promote your story.  Your story is great, the little blurb from a few pages back is all you need.  Your investments are successful and you've done well for partners.  Unfortunately people don't know how well you've done if you don't tell them.  I know I had no idea how well your fund has done.

 

I think selling gets a bad rap, selling is a natural thing.  You have something that solves someone else's problem.  Why is it bad to propose something that solves their problem, even if there's a fee?  There are many people in sub-par funds who would benefit if they were in your fund.

 

Maybe I'm inferring, but often an excuse to not sell is that it takes time away from the main activity, in your case investing.  Here's another way to think about it, which is easier, to pick an investment that goes up 50%, or to find a new investor?  If you can find a few new investors in the time it would take to find a new investor you haven't lost anything.  You've actually gained because you can compound that new investor money, and the new money is sure, whereas the investment performance isn't.

 

I don't think you need to go Tilson all out, but a bit of promotion isn't a bad thing, especially if you have results worth promotion.

 

This is the ideal of "selling".  Of course most salespeople have been trained in a corruption of this, where you want to get people to buy things at any cost, regardless of whether they need them, or it's useless, or whatever.  Sometimes the salespeople even fool themselves.  This is why I think many people recoil at the thought of "selling".

[VAL9000]

This is the ideal of "selling".  Of course most salespeople have been trained in a corruption of this, where you want to get people to buy things at any cost, regardless of whether they need them, or it's useless, or whatever.  Sometimes the salespeople even fool themselves.  This is why I think many people recoil at the thought of "selling".

 

Which is mostly an incentives problem.  People are rewarded to "win at all costs", which brings bad behaviour to bear.

 

My view on sales is: If you genuinely believe that a prospective customer is better off with your product or service, then you are doing them a disservice by not approaching them with your offering.

 

[Palantir]

 

 

That's your problem, man! You gotta market yourself. ;)

 

Yep. Steve Jobs or Jim Koch didn't spend their lives in their garage making computers or beer did they? I think this is analogous to a job seeker who instead of trying to "sell" himself by networking, prefers to spend 500 hours studying for CFA exams.

[tombgrt]

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!     

 

Ok, I get what you are saying. But how is AAPL (or SD) classic Ben Graham? If anything, it's classic Buffett, buying future growth in CF. No?

 

 

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.

 

And that's with Apple making more money than ever and it has a better balance sheet than virtually any other company in the world of its size.  It was overvalued when it was trading at $650 a share, and now the pendulum has swung the other way.  Cheers!

 

How much was it overvalued? I'm pretty sure that no one can be very exact on this. So I'd say at least 20% above a raw estimate of IV? Making IV $520 6 months ago? You started buying at $450? Does this imply that you think IV has grown a lot of these 6 months? Because I dont see you buying something at 85-90% of IV. :)

 

 

Let me know when you open up your funds for European investors with small capitals to invest (say $10k/fund), I would be the first European to join your nimble fund. ;) I assume it's not possible now because of the small size and associated costs?

 

 

 

[Parsad]

Ok, I get what you are saying. But how is AAPL (or SD) classic Ben Graham? If anything, it's classic Buffett, buying future growth in CF. No?

 

AAPL is trading for less than 7 times earnings after cash...doesn't matter whether those earnings grow or not in the next 7 years.  I get my money back.  If they grow, that's icing on the cake.  The assumption is that AAPL is not a quality business at a fair price, but a business that is in tough competition, selling at a cheap price. 

 

SD is trading below what the assets are worth in the open market...barring the recent firesale by CHK.  If you sold off their properties piece by piece, the market value is less than the sum of the parts plus the cash on hand now.  Again, not a good business...just the assets are selling cheap. 

 

How much was it overvalued? I'm pretty sure that no one can be very exact on this. So I'd say at least 20% above a raw estimate of IV? Making IV $520 6 months ago? You started buying at $450? Does this imply that you think IV has grown a lot of these 6 months? Because I dont see you buying something at 85-90% of IV.

 

When it was trading for $650, it was at a P/E of about 15 on current earnings after cash.  Not necessarily overvalued, but definitely fairly valued.  It went down to $450, and was trading at 8 times current earnings after cash...as I said then, it wasn't dirt cheap, but cheap...so we started nibbling.  As it goes down, obviously the value goes up...we took a little bigger bite.  Cheers!

[racemize]

When it was trading for $650, it was at a P/E of about 15 on current earnings after cash.  Not necessarily overvalued, but definitely fairly valued.  It went down to $450, and was trading at 8 times current earnings after cash...as I said then, it wasn't dirt cheap, but cheap...so we started nibbling.  As it goes down, obviously the value goes up...we took a little bigger bite.  Cheers!

 

I understand what you are saying about the $650 price, but I'm a little baffled by the swings on the board's feeling on Apple overall.  In 2011-2012, I was interested in it at < 400, but there seemed to be a lot of negativity here, even though it was < 10 P/E less cash.  Granted, now it is even cheaper on that basis (though not tons more), but the story wasn't/isn't that much different.  In other words, I'm confused as to why there seems to be a lot more people bullish now versus the general "Apple's death is inevitable" feeling I got back then on fundamentals that were/are not hugely different.

 

I do understand that there were a lot of better/more distracting deals at that time though, so perhaps that was it.

[Guest valueInv]

When it was trading for $650, it was at a P/E of about 15 on current earnings after cash.  Not necessarily overvalued, but definitely fairly valued.  It went down to $450, and was trading at 8 times current earnings after cash...as I said then, it wasn't dirt cheap, but cheap...so we started nibbling.  As it goes down, obviously the value goes up...we took a little bigger bite.  Cheers!

 

I understand what you are saying about the $650 price, but I'm a little baffled by the swings on the board's feeling on Apple overall.  In 2011-2012, I was interested in it at < 400, but there seemed to be a lot of negativity here, even though it was < 10 P/E less cash.  Granted, now it is even cheaper on that basis (though not tons more), but the story wasn't/isn't that much different.  In other words, I'm confused as to why there seems to be a lot more people bullish now versus the general "Apple's death is inevitable" feeling I got back then on fundamentals that were/are not hugely different.

 

I do understand that there were a lot of better/more distracting deals at that time though, so perhaps that was it.

Welcome to herd behavior.

[Palantir]

 

I understand what you are saying about the $650 price, but I'm a little baffled by the swings on the board's feeling on Apple overall.  In 2011-2012, I was interested in it at < 400, but there seemed to be a lot of negativity here, even though it was < 10 P/E less cash.  Granted, now it is even cheaper on that basis (though not tons more), but the story wasn't/isn't that much different.  In other words, I'm confused as to why there seems to be a lot more people bullish now versus the general "Apple's death is inevitable" feeling I got back then on fundamentals that were/are not hugely different.

 

I do understand that there were a lot of better/more distracting deals at that time though, so perhaps that was it.

 

Allergic to growth. When a company is doing well and growing fast, they stay away because PE is high. After the growth is gone and stock is heading to dumps, they say "this is cheap".

 

 

[LC]

In 2011-2012, I was interested in it at < 400, but there seemed to be a lot of negativity here, even though it was < 10 P/E less cash.  Granted, now it is even cheaper on that basis (though not tons more), but the story wasn't/isn't that much different.  In other words, I'm confused as to why there seems to be a lot more people bullish now versus the general "Apple's death is inevitable" feeling I got back then on fundamentals that were/are not hugely different.

 

In retrospect, buying AAPL a year or two ago sub-400 would have been a smart move.

[Parsad]

When it was trading for $650, it was at a P/E of about 15 on current earnings after cash.  Not necessarily overvalued, but definitely fairly valued.  It went down to $450, and was trading at 8 times current earnings after cash...as I said then, it wasn't dirt cheap, but cheap...so we started nibbling.  As it goes down, obviously the value goes up...we took a little bigger bite.  Cheers!

 

I understand what you are saying about the $650 price, but I'm a little baffled by the swings on the board's feeling on Apple overall.  In 2011-2012, I was interested in it at < 400, but there seemed to be a lot of negativity here, even though it was < 10 P/E less cash.  Granted, now it is even cheaper on that basis (though not tons more), but the story wasn't/isn't that much different.  In other words, I'm confused as to why there seems to be a lot more people bullish now versus the general "Apple's death is inevitable" feeling I got back then on fundamentals that were/are not hugely different.

 

I do understand that there were a lot of better/more distracting deals at that time though, so perhaps that was it.

Welcome to herd behavior.

 

Herd behavior would have been buying it then, and selling it now.  Cheers!

[racemize]

 

Welcome to herd behavior.

 

Herd behavior would have been buying it then, and selling it now.  Cheers!

 

I think he means contra-herd behavior (i.e., the herd behavior on this board).  It is interesting to watch, especially when the market goes up and everyone starts talking about selling or how much cash they have, even when there are still some "deals" around.  That example may of course be the correct behavior (though I'm still 100% in), but this phenomenon seems particularly extreme on Apple.

[thecynic]

I understand what you are saying about the $650 price, but I'm a little baffled by the swings on the board's feeling on Apple overall.  In 2011-2012, I was interested in it at < 400, but there seemed to be a lot of negativity here, even though it was < 10 P/E less cash.  Granted, now it is even cheaper on that basis (though not tons more), but the story wasn't/isn't that much different.  In other words, I'm confused as to why there seems to be a lot more people bullish now versus the general "Apple's death is inevitable" feeling I got back then on fundamentals that were/are not hugely different.

 

I do understand that there were a lot of better/more distracting deals at that time though, so perhaps that was it.

 

Great observation, I attribute it to anchoring and weighting recent history higher than more distant history. The $650 price is more recent data point then the $400 price and so people think it is more undervalued now than when it was $400. Your post just made me realize my own folly and that I have been biased the same way , so thank you.

[Guest valueInv]

 

Welcome to herd behavior.

 

Herd behavior would have been buying it then, and selling it now.  Cheers!

 

I think he means contra-herd behavior (i.e., the herd behavior on this board).  It is interesting to watch, especially when the market goes up and everyone starts talking about selling or how much cash they have, even when there are still some "deals" around.  That example may of course be the correct behavior (though I'm still 100% in), but this phenomenon seems particularly extreme on Apple.

 

Absolutely. What still surprises me is that even now, when value investors are actually buying, there is little analysis of Apple's business being discussed. Isn't " investment is its best when its businesslike" a corner of value investing? People look at Apple as a black box stock just as they did with financials. The herd moved into financials when there was enough social proof from Berkowitz, Buffet and others.

[plato1976]

True. Didn't see discussion about how bad the margin compression can be

Will we go to $30 per share , or $20 per share , or even $10 ?

Even at $20 per share, I don't think it's a bad value if the price goes to sth like $380

But I really have no idea how badly the margin compression will be

really no clue

 

 

Welcome to herd behavior.

 

Herd behavior would have been buying it then, and selling it now.  Cheers!

 

I think he means contra-herd behavior (i.e., the herd behavior on this board).  It is interesting to watch, especially when the market goes up and everyone starts talking about selling or how much cash they have, even when there are still some "deals" around.  That example may of course be the correct behavior (though I'm still 100% in), but this phenomenon seems particularly extreme on Apple.

 

Absolutely. What still surprises me is that even now, when value investors are actually buying, there is little analysis of Apple's business being discussed. Isn't " investment is its best when its businesslike" a corner of value investing? People look at Apple as a black box stock just as they did with financials. The herd moved into financials when there was enough social proof from Berkowitz, Buffet and others.

[constructive]

True. Didn't see discussion about how bad the margin compression can be

Will we go to $30 per share , or $20 per share , or even $10 ?

 

I don't quite get the margin compression thesis. It seems to me that in Apple's case, margins are more of an independent variable and revenues are more of a dependent variable. Especially for products that are supply constrained.