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In my recent trips to the Apple Store the Air 2 seemed to be flying off the shelves.

 

It certainly has less competition from the (lower margin) iPad Mini this year, since they aren't matched on specs like last year. Nice way to upsell. A bit like the 16/64gb storage options, pushing people to the second tier, increasing ASPs.

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Two Months Later, There's Still a Wait to Buy the iPhone 6

 

http://www.bloomberg.com/news/2014-11-21/two-months-later-there-s-still-a-wait-to-buy-the-iphone-6.html

 

Still supply-limited. There's even speculation that all the money spent for Apple products will hurt other retailers this holiday season...

 

http://www.marketwatch.com/story/will-apples-iphone-6-ruin-christmas-for-retailers-2014-11-20

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http://www.forbes.com/sites/chuckjones/2014/12/03/apples-iphone-gained-significant-share-in-the-us-japan-germany-and-great-britain/

 

iPhone’s US share back above 40%

 

Apple’s iPhone share increased almost 9 percentage points from 32.6% in September to 41.5% in October. While the 41.5% is only 0.7 points above last October the 8.9 point gain is almost double last years 4.9 point gain from September 2013 to October when the iPhone 5c and 5s were launched. However, it is less than the iPhone 5’s gain of 18.4 points from 34.6% in September 2012 to 53.0% in October.

 

Japan’s iPhone share almost at 50%

 

Apple’s iPhone share increased by almost 17 points from 31.3% in September to 48.0% in October. While the 16.7 point month to month gain is greater than last years 13.9 point gain the 48.0% share is less than the 61.1% a year ago. However last years results are probably skewed since October 2013 was the first month that NTT DoCoMo supported the iPhone so there was probably huge pent-up demand for it by NTT’s users.

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I took 5% position in the 2015 leaps when it was at 450, bought some more leaps and mini leaps when it went down to 400, think it was about %10 at that point. Sold the majority of them when it was at $625 for a little over a 2 bagger on average.

 

I had a few of the minis left that I finally sold today for 10x. Would have been a big year for me if I had held onto the whole position I did not want to get greedy and go bust. In retrospect it might have been a good idea to sell half at 625 and use the proceeds to hedge or just sell enough to cover my cost basis and let the rest run?

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Funny, I also sold the last of my position today. My weighting ran as high as 80% (when it fell below $400 last year). Great run over the past 18 months. I have been slowly shifting the past three months into a large position in BAC and a basket of small positions (Ford, AIG, IBM, RSX). Starting to nibble on PWE and COS. Sitting on lots of cash and happy to wait for more fat pitches.

 

Regarding Apple, the last 18 months has been a great example of how the market can misprice stocks in the short term. Sentiment really looks to drive prices of many companies in the short term (daily, weekly, monthly). It also helps when you have a solid management team making decisions to benefit the company long term. Why did Apple double? Stock was cheap. Management executed. Underlying business improved. Competitors lost their shine. Mr. Market fell back in love with the company. Moving forward I would expect the stock to increase similar to earnings per share growth. Great company. Looks to me like oil and gas might be close to where Apple was 18 months ago - near term issues but great medium to long term outlook. Time will tell.

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http://www.bloomberg.com/news/2014-12-16/apple-prevails-at-1-billion-trial-over-digital-music.html

 

Apple Inc. (AAPL) prevailed in a potential $1 billion lawsuit by iPod customers who claimed updates to iTunes in 2006 were meant to kill competition, a decisive victory after only three hours of jury deliberations.[...]

 

Claims that Apple “blew up” the iPods of customers who bought music from RealNetworks to force them to purchase another iPod were untrue and concocted by consumer lawyers who lacked a basic understanding of iTunes technology, Apple lawyers told the jury. The opposition failed to show that a single iPod user was cheated out of their downloaded music or suffered any harm as a result of the software changes, Apple attorney Bill Isaacson said.

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Did anyone study the turnaround of AAPL in 2002? Could you please share with us some of your insights.  :)

 

You mean in 1997 when NeXT did a reverse-takeover?

 

Actually both. 1997 is more interesting as AAPL was almost bankrupt at that time. 2002 is also interesting. I just pulled the 10-K for 2002 and its EPS was only 0.18. So even if buying after the IT bubble burst at $2 per share, it is not that cheap. Yet the stock jumped up 5000% from then.

1997 is definitely interesting. If you travel back in time, would you be able to identify the margin of safety and buy?

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Did anyone study the turnaround of AAPL in 2002? Could you please share with us some of your insights.  :)

 

You mean in 1997 when NeXT did a reverse-takeover?

 

Actually both. 1997 is more interesting as AAPL was almost bankrupt at that time. 2002 is also interesting. I just pulled the 10-K for 2002 and its EPS was only 0.18. So even if buying after the IT bubble burst at $2 per share, it is not that cheap. Yet the stock jumped up 5000% from then.

1997 is definitely interesting. If you travel back in time, would you be able to identify the margin of safety and buy?

 

Superficially and obviously, you have Apple doing new market disruption at this time, with iTunes and the iPod both being released in 2001.

 

That time period also roughly coincides with the start of the web rather than native OS apps as the dominant interaction model for computing. I guess a little early. Facebook launched in 2004.

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Did anyone study the turnaround of AAPL in 2002? Could you please share with us some of your insights.  :)

 

You mean in 1997 when NeXT did a reverse-takeover?

 

If I remember correctly, I came across the investment thesis written by Michael Burry on the Silicon Investor message board.

 

Let see... I googled "apple net-net michael burry". A couple of informative results pop up at the top.

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Did anyone study the turnaround of AAPL in 2002? Could you please share with us some of your insights.  :)

 

You mean in 1997 when NeXT did a reverse-takeover?

 

Actually both. 1997 is more interesting as AAPL was almost bankrupt at that time. 2002 is also interesting. I just pulled the 10-K for 2002 and its EPS was only 0.18. So even if buying after the IT bubble burst at $2 per share, it is not that cheap. Yet the stock jumped up 5000% from then.

1997 is definitely interesting. If you travel back in time, would you be able to identify the margin of safety and buy?

 

As i recall, it was a net net then. 

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Did anyone study the turnaround of AAPL in 2002? Could you please share with us some of your insights.  :)

 

You mean in 1997 when NeXT did a reverse-takeover?

 

If I remember correctly, I came across the investment thesis written by Michael Burry on the Silicon Investor message board.

 

Let see... I googled "apple net-net michael burry". A couple of informative results pop up at the top.

 

Thank you! I googled that and did find something very interesting. I was thinking about BBRY, but BBRY seems much more expensive on this valuation basis.

"If you were willing to overcome your biases against tech stocks, you would have seen a no-brainer value investment with Apple. Around the time of Burry’s post, Apple had about $4.5B in cash and marketable securities, with only $300M in debt. If you had taken Apple’s market cap, added the debt, and backed out cash, you would have ended up with the operating business being valued at only 10% of sales. That is absurdly low. The thing is, I am sure many investors missed this because they chose to ignore all tech stocks."

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https://www.apple.com/pr/library/2015/01/08App-Store-Rings-in-2015-with-New-Records.html

 

Apple® today announced that the first week of January set a new record for billings from the App Store℠ with customers around the world spending nearly half a billion dollars on apps and in-app purchases, and New Year’s Day 2015 marked the single biggest day ever in App Store sales history. These milestones follow a record-breaking 2014, in which billings rose 50 percent and apps generated over $10 billion in revenue for developers. To date, App Store developers have earned a cumulative $25 billion from the sale of apps and games.

 

50% growth in one year! And if developers earned 25 billion, Apple got something like 11bn (their 30% cut on everything sold on the app store, must be extremely high margin).

 

In just six years, the iOS ecosystem has helped create 627,000 jobs in the US alone

 

There's your stimulus, US economy. You're welcome.

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I wonder what percent of that money came from free app store coupons given by Apple for back-to-school promotions for buying hardware and the like. Probably not very high I suppose.

 

Personally, all my App Store purchases come from third-party coupons I buy on eBay, where I get them for .75-.80 on the dollar.

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I wonder what percent of that money came from free app store coupons given by Apple for back-to-school promotions for buying hardware and the like. Probably not very high I suppose.

 

Personally, all my App Store purchases come from third-party coupons I buy on eBay, where I get them for .75-.80 on the dollar.

 

That's a good question, though as you say, that's probably pretty small, and the side benefits (extra stickiness, breaking the ice) of making people invest in the ecosystem, especially younger people, no doubt are bigger.

 

Another good question is: How much 'float' does Apple have from iTunes gift cards? People pay upfront and only use them later, sometimes much later, and many must be forgotten in drawers. I know my wife has had a $15 iTunes gift card on her desk for a few months.

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