AAPL - Apple Inc.

[DooDiligence]

I sold 1/3 of my AAPL when it hit 160-ish and put the money into BRK.  :D

 

I've been thinking real hard about Apple for the past few months.

 

I'm seriously contemplating selling 3/4 of my shares & putting all the money in BRK.B on 2 Jan.

(the remaining AAPL shares would be "house money")

 

I figure u can get indirect exposure to Apple through Berkshire with better downside protection.

 

On 2nd thought I'll hold until 29 Jan.

If no special dividend announcement, will sell 1/3 & put it into BRK.

Wait another quarter & still no special div, sell another 1/3 & put it into BRK.

(Keep 1/3 just for fun & so I don't completely miss the repatriation dividend?)

[Dynamic]

I'm giving serious thought to our AAPL position (about 27% of our portfolio) versus BRK.B (65%) too, though I haven't yet decided.

 

I did spend my 10.5% cash position on BRK.B in mid December, figuring BRK.B's downside was little worse than cash and its upside considerably better, anticipating compounding of Intrinsic Value at about 7-9% above inflation.

 

I'm trying desperately to avoid anchoring on my previous purchase price, I'd say AAPL isn't looking overvalued at present and has potential to compound earnings at least 5-10% above inflation over the next decade. It is less diversified than BRK.B. It certainly has more downside potential than BRK.B, e.g. if earnings were to decline versus prior-year comparables I could see it declining below $120, but it has potential for good upside too if stronger than expected iPhone X and iPhone 8+ sales and profits emerge for example. There seems to be a modest margin of safety difference (mostly in terms of downside protection) between AAPL and BRK.B at the current time and current prices, but probably less than I'd usually look for before making a value trade.

 

At a crude level BRK.B is trading at about 20x trailing Look-Through EPS, while AAPL is trading about 19x trailing EPS. The S&P500 is on about 26-27x at present and is probably not as 'awash with cash' relative to market valuation as BRK.B or AAPL are, and to my mind its prospects for compounding aren't as good.

 

Maybe (though I'm not holding my breath) I'll end up finding a high conviction opportunity that will compel me to sell some of my AAPL or BRK.B instead of trying to divine if I'm receiving more value than I'm giving up if I switch from one to the other. At the moment the distribution curves representing my cloudy idea of a range of Intrinsic Value for those two options have a lot of overlap in my mind and I can't see either as the obvious winner, but perhaps it wouldn't take much change in market price or financial figures for me to see BRK.B's limited downside as the more attractive prospect even at the expense of limiting my near-term upside potential too.

[DooDiligence]

This seems like a good argument against any large direct shareholder windfall from repatriation.

 

www.seekingalpha.com/amp/article/4136552-apple-unlikely-spend-large-war-chest

[Cigarbutt]

Reading the latest Wedgewood Partners report (Q4 2017), came across an interesting (and fairly bullish) summary of progress and outlook of key variables concerning Apple. (pp 13-22)

https://docs.wixstatic.com/ugd/5bfe4b_d9d70a1613fe4e2c86d850ab2fa7ecce.pdf

 

Particularly surprised by the size and growth of Apple Services.

Recently read about IBM and how (some people feel) the shift to services coupled with R+D that did not manage to keep pace with disrupters marked the transition to a new phase.

Apple is obviously different but, looking at what happened in the last 10 to 15 years, it must be awfully hard to have an idea where market threats will come from.

[Dynamic]

Thanks for linking to the full report, Cigarbutt. I saw some brilliant excerpts earlier on Twitter and was planning to look for it myself.

[rkbabang]

Reading the latest Wedgewood Partners report (Q4 2017), came across an interesting (and fairly bullish) summary of progress and outlook of key variables concerning Apple. (pp 13-22)

https://docs.wixstatic.com/ugd/5bfe4b_d9d70a1613fe4e2c86d850ab2fa7ecce.pdf

 

Particularly surprised by the size and growth of Apple Services.

Recently read about IBM and how (some people feel) the shift to services coupled with R+D that did not manage to keep pace with disrupters marked the transition to a new phase.

Apple is obviously different but, looking at what happened in the last 10 to 15 years, it must be awfully hard to have an idea where market threats will come from.

 

Thanks for posting.  I read it for the Apple commentary but this really stuck out.  What a run we've had!

 

"Incredibly, the Great Bull Market of 2009-2017 momentum actually increased during the fourth quarter. Downside volatility in the stock market simply appears to be a thing of the past (though we are dubious.) 2017 set numerous records for historically low volatility in both the stock and bond markets. The fourth quarter represented the 20th positive quarter over the past 21. The last negative quarter was two years ago when the stock market “suffered” a -6.6% “collapse” during the third quarter of 2015. In fact, if the current bull advances without at least a -5% correction by the third week in January, it will be the longest such streak since 1928. Further, the stock market has not suffered even a -3% drawdown in over 13 months, by far the longest in history. In 2017 alone the stock market was up every month (a calendar year record) and has now been up 14 months in a row (a record). 95% of the trading days during 2017 had an intraday swing of less than 1% – another historic record. The Dow Jones Industrial Average set 71 new highs in 2017 – the most since 1910. The second most new-highs figure (65) was recorded back in 1925. The last notable double-digit “correction” was six years ago, way back in 2011. The stock market has recorded positive gains 9 consecutive years and in 14 out of the past 15 years. Even volatility highs during 2017 were the lowest on record."

 

[John Hjorth]

CNN: Apple: We'll pay $38B in taxes and add 20,000 jobs in the U.S..

[Liberty]

https://www.aboveavalon.com/notes/2018/1/23/apple-watch-is-a-bridge-to-the-future

[boilermaker75]

https://www.aboveavalon.com/notes/2018/1/23/apple-watch-is-a-bridge-to-the-future

 

I did not realize how well the Apple watch was selling. I did buy one for my daughter a year ago, but have not thought about getting one for myself.

[SlowAppreciation]

I count how many watches and AirPods I see people wearing every day. Definitely more and more than even just a few months ago...

[nwoodman]

https://www.aboveavalon.com/notes/2018/1/23/apple-watch-is-a-bridge-to-the-future

 

Great article.  Been using the S3 since launch and it is a thing of joy and beauty.  Looking forward to seeing how it integrates with the Homepod in a couple of weeks time. Shame about the Homepod stereo pairing not working at launch though...was going to buy two

 

cheers

nwoodman

[Liberty]

Thread:

[Liberty]

https://stratechery.com/2018/apples-middle-age/

[Liberty]

https://daringfireball.net/2018/02/homepod

[johnny]

The decision to use a three-generation-old chip in the Homepod seems mind-bogglingly stupid to me. As has been pointed out by many people that know more about speakers than me, "good speakers" have an expected lifetime of a decade or more. Them putting old, excess silicon in this thing just seems to confirm to me that they have no plans, and no real expectations, of making this thing impressively powerful. And it feeds into all of the negative sentiment low-information Apple skeptics like to peddle (overpriced, greedy component decisions, planned obsolescence).

 

Not saying that somebody with better chip chops than me couldn't make the case that better silicon is not necessary (and will not become useful even in the next ten years). But the superficial appearance of that decision is incredibly costly.

 

At a higher level, rather than worrying about getting their shitty Siri experience into more places, and more hours of my day, I'd much rather they focus on making it not suck in the places where I cannot avoid it. Something as simple as the highly variable "readiness" time from when I invoke Siri is so atrocious that it basically makes me dread using the feature at all.

[rkbabang]

The decision to use a three-generation-old chip in the Homepod seems mind-bogglingly stupid to me. As has been pointed out by many people that know more about speakers than me, "good speakers" have an expected lifetime of a decade or more. Them putting old, excess silicon in this thing just seems to confirm to me that they have no plans, and no real expectations, of making this thing impressively powerful. And it feeds into all of the negative sentiment low-information Apple skeptics like to peddle (overpriced, greedy component decisions, planned obsolescence).

 

Not saying that somebody with better chip chops than me couldn't make the case that better silicon is not necessary (and will not become useful even in the next ten years). But the superficial appearance of that decision is incredibly costly.

 

At a higher level, rather than worrying about getting their shitty Siri experience into more places, and more hours of my day, I'd much rather they focus on making it not suck in the places where I cannot avoid it. Something as simple as the highly variable "readiness" time from when I invoke Siri is so atrocious that it basically makes me dread using the feature at all.

 

A decade? I still have a set of Pinnacle speakers (2 satellites and a subwoofer) that I bought when I was a teenager in the 80s. They have been in almost constant use the entire time. Up until about 2 years ago I was using them as the front left, front right, & sub on my surround sound system.  They are unused in storage now, but I bet they still work fine.

 

[Liberty]

The A8 is very powerful for audio, especially since most of the other stuff will happen cloud-side (search queries and AI-related stuff) anyway and there's no screen with millions of pixels to refresh 60 times a second or whatever. I think you under-estimate how powerful SoCs like the A8 are for the task at hand. Especially since an A8 on battery gets heavily power-managed and throttled while an A8 plugged in the wall will be able to go flat out with no thermal worries... If anything, it's overkill.

[johnny]

I think you under-estimate how powerful SoCs like the A8 are for the task at hand.

 

I think you under-estimate what the set of potential "tasks at hand" will be for an audio-interface computing device.

 

You seem to assume that the extreme thin client model is the obvious end game here. I'm not sure that's true, because 1. Apple has gone out of their way to state their philosophical/privacy objections to the thin client model and 2. Apple has demonstrated comic ineptitude in most of the domains that model requires to work. This can't be emphasized enough because I still hear Apple people in denial about it: Siri is terrible. It is really really really bad.

 

Frankly, they should be thinking of all of the on-device stuff they can be doing to differentiate, not deciding to fight the battle on the terms that give the most advantage to their two competitors.

 

In general, developers figure out ways to use computing resouces as they come available. Nobody could have told you in 2007 -why- Excel in 2016 was going to require 8 times the amount of RAM to run. But anybody familiar with the history of software could have probably made such a prediction correctly.

 

Likewise, I can't tell you, with certainty, what the TalkyTube products are going to be doing in five years. I can just tell you that I suspect HomePod1 will not be able to hang, and maybe that wouldn't have been true if they'd just given up an extra $10 of unit profit.

 

That's a shame, because this looks to me like yet another space that was a totally easy lay-up for Apple that they're inexplicably botching. (TV still being the champion)

 

[DooDiligence]

The decision to use a three-generation-old chip in the Homepod seems mind-bogglingly stupid to me. As has been pointed out by many people that know more about speakers than me, "good speakers" have an expected lifetime of a decade or more. Them putting old, excess silicon in this thing just seems to confirm to me that they have no plans, and no real expectations, of making this thing impressively powerful. And it feeds into all of the negative sentiment low-information Apple skeptics like to peddle (overpriced, greedy component decisions, planned obsolescence).

 

Not saying that somebody with better chip chops than me couldn't make the case that better silicon is not necessary (and will not become useful even in the next ten years). But the superficial appearance of that decision is incredibly costly.

 

At a higher level, rather than worrying about getting their shitty Siri experience into more places, and more hours of my day, I'd much rather they focus on making it not suck in the places where I cannot avoid it. Something as simple as the highly variable "readiness" time from when I invoke Siri is so atrocious that it basically makes me dread using the feature at all.

 

IMHO, the fact that Siri & Maps suck so bad, is a bellwether, and I sold off 1/3 of my Apple before the drop (pure luck.)

(Too bad Musk is busy ATM.)

 

I prefer my exposure to AAPL to be through BRK, rather than direct ownership.

[Liberty]

I think you under-estimate how powerful SoCs like the A8 are for the task at hand.

 

I think you under-estimate what the set of potential "tasks at hand" will be for an audio-interface computing device.

 

You seem to assume that the extreme thin client model is the obvious end game here. I'm not sure that's true, because 1. Apple has gone out of their way to state their philosophical/privacy objections to the thin client model and 2. Apple has demonstrated comic ineptitude in most of the domains that model requires to work. This can't be emphasized enough because I still hear Apple people in denial about it: Siri is terrible. It is really really really bad.

 

Frankly, they should be thinking of all of the on-device stuff they can be doing to differentiate, not deciding to fight the battle on the terms that give the most advantage to their two competitors.

 

In general, developers figure out ways to use computing resouces as they come available. Nobody could have told you in 2007 -why- Excel in 2016 was going to require 8 times the amount of RAM to run. But anybody familiar with the history of software could have probably made such a prediction correctly.

 

Likewise, I can't tell you, with certainty, what the TalkyTube products are going to be doing in five years. I can just tell you that I suspect HomePod1 will not be able to hang, and maybe that wouldn't have been true if they'd just given up an extra $10 of unit profit.

 

That's a shame, because this looks to me like yet another space that was a totally easy lay-up for Apple that they're inexplicably botching. (TV still being the champion)

 

You don't know how products are iterated. It's also a shame the iPhone didn't come out with a GPS, the ability to shoot video, a hiDPI screen, an app store, or a more powerful SoC, right? Watches are also kept for a very long time, yet the first version of the Apple Watch wasn't the end-all-be-all, right? But they're growing over 50%/year and are probably going to be the most profitable Watch brand in the world soon (if not already) within a few years. Maybe Apple will miss with the Homepod, but it won't be because version 1 wasn't perfect and didn't have enough FLOPS of computing power.

 

Putting an A11 in the Homepod would just have made it more expensive and there would be nothing to use the extra power, it would have just laid there wasted. Software doesn't magically appear, and if you think privacy requires local instances of huge power-hungry software, you don't understand that either. I'm pretty sure the Homepod is massively more powerful than any smartspeaker by Amazon, Google, Sonos, or anyone else out there. Probably by orders of magnitude.

 

Apple Maps and Siri are inferior to equivalent Google offerings because Google is the best at those, had many years of head-start, and because each company's DNA is set up to be exceptional at different thing. The same reason why Android is inferior to iOS and Google's hardware is inferior to Apple's hardware. If you're looking for a perfect company that is better than everyone else at absolutely everything, let me know when you find it.

[Liberty]

[rkbabang]

I think you under-estimate how powerful SoCs like the A8 are for the task at hand.

 

I think you under-estimate what the set of potential "tasks at hand" will be for an audio-interface computing device.

 

You seem to assume that the extreme thin client model is the obvious end game here. I'm not sure that's true, because 1. Apple has gone out of their way to state their philosophical/privacy objections to the thin client model and 2. Apple has demonstrated comic ineptitude in most of the domains that model requires to work. This can't be emphasized enough because I still hear Apple people in denial about it: Siri is terrible. It is really really really bad.

 

Frankly, they should be thinking of all of the on-device stuff they can be doing to differentiate, not deciding to fight the battle on the terms that give the most advantage to their two competitors.

 

In general, developers figure out ways to use computing resouces as they come available. Nobody could have told you in 2007 -why- Excel in 2016 was going to require 8 times the amount of RAM to run. But anybody familiar with the history of software could have probably made such a prediction correctly.

 

Likewise, I can't tell you, with certainty, what the TalkyTube products are going to be doing in five years. I can just tell you that I suspect HomePod1 will not be able to hang, and maybe that wouldn't have been true if they'd just given up an extra $10 of unit profit.

 

That's a shame, because this looks to me like yet another space that was a totally easy lay-up for Apple that they're inexplicably botching. (TV still being the champion)

 

You don't know how products are iterated. It's also a shame the iPhone didn't come out with a GPS, the ability to shoot video, a hiDPI screen, an app store, or a more powerful SoC, right? Watches are also kept for a very long time, yet the first version of the Apple Watch wasn't the end-all-be-all, right? But they're growing over 50%/year and are probably going to be the most profitable Watch brand in the world soon (if not already) within a few years. Maybe Apple will miss with the Homepod, but it won't be because version 1 wasn't perfect and didn't have enough FLOPS of computing power.

 

Putting an A11 in the Homepod would just have made it more expensive and there would be nothing to use the extra power, it would have just laid there wasted. Software doesn't magically appear, and if you think privacy requires local instances of huge power-hungry software, you don't understand that either. I'm pretty sure the Homepod is massively more powerful than any smartspeaker by Amazon, Google, Sonos, or anyone else out there. Probably by orders of magnitude.

 

Apple Maps and Siri are inferior to equivalent Google offerings because Google is the best at those, had many years of head-start, and because each company's DNA is set up to be exceptional at different thing. The same reason why Android is inferior to iOS and Google's hardware is inferior to Apple's hardware. If you're looking for a perfect company that is better than everyone else at absolutely everything, let me know when you find it.

 

I don't want the perfect company I want the perfect device.  Google should stop putting effort into Android and focus on maps/waze and its voice assistant.  Apple should stop putting effort into maps and siri and build google maps/waze and google's voice assistant directly into IOS/carplay/homePod/etc.  That would be the best of both worlds.  I don't know what Apple is doing with its TV product, if it wants to continue in that area it should acquire Roku and be done with it.

 

[Liberty]

Apple was fine partnering with Google up until the point when Eric Schmidt, from his seat on Apple's board, decided to compete with Apple. At that point it was pretty hard for Apple to let their main competitor control important software on their platform, so they had to build their own. I don't think they necessarily wanted to do that, but it was a strategic imperative.

[johnny]

 

You don't know how products are iterated. It's also a shame the iPhone didn't come out with a GPS, the ability to shoot video, a hiDPI screen, an app store, or a more powerful SoC, right? Watches are also kept for a very long time, yet the first version of the Apple Watch wasn't the end-all-be-all, right? But they're growing over 50%/year and are probably going to be the most profitable Watch brand in the world soon (if not already) within a few years. Maybe Apple will miss with the Homepod, but it won't be because version 1 wasn't perfect and didn't have enough FLOPS of computing power.

 

The Phone and the Watch weren’t massively late “me too” products in a category that was already on the way to being well-defined by competitors. And in both cases, there were some very basic engineering, thermal, or energy constraints that don't apply to this situation.

 

The HomePod is not coming into and redefining the space. The iPhone entered the cell phone market and said “Guess what, there’s something called a smartphone, and it’s great.” The HomePod is entering a SMART speaker market and saying, “Come on guys, smart stuff isn’t -that- important. Let’s just listen to U2 with voice commands”. I'm saying this is suggestive of how uninspired Apple seems to be about this space, and their component decisions are also consistent with that read.

 

 

if you think privacy requires local instances of huge power-hungry software, you don't understand that either.

 

"Privacy" is an abstraction that requires no software and no power, since it’s the absence of something. Getting work done while maintaining some privacy standard requires quite a bit of software and power (and it magically requires more as time goes on, imagine that). You may notice this if you ever buy a new iMac that needs to run facial recognition on your iCloud Photo library and takes about a month to do it, probably committing more FLOPS to the project of categorizing all of your dog photos than all of the aggregate on-craft computation of every space shuttle mission ever.

 

I’m pretty sure the Homepod is massively more powerful than any smartspeaker by Amazon, Google, Sonos, or anyone else out there. Probably by orders of magnitude.

 

Maybe. But Amazon and Google are selling cheap enough speakers that, should they not work in two years, won't inspire reddit jihad against the companies.  More importantly, both companies are pretty much all-in strategically on the extreme thin-client model. Apple is selling a speaker that costs five times as much, will be consequently held to a much higher standard of longevity, and Apple, well, you know, fucking sucks at cloud software.

 

Apple Maps and Siri are inferior to equivalent Google offerings because Google is the best at those, had many years of head-start, and because each company's DNA is set up to be exceptional at different thing.

 

Well that's a convenient excuse for why Siri gets beaten by Google. It does not explain at all why Siri gets beaten by the much younger Alexa. In any case, you'd think that if Apple's DNA was so error-ridden in the "server-side software" space that this could actually be an argument that supports my contention that Apple is making a mistake for designing a product that relies entirely and exclusively on server-side software.

[gary17]

Liberty

I thought you closed your investment on Apple but seems to still follow this quite a bit

 

I ran some numbers and with the tax rate at 15% this is looking quite attractive for me. 

 

This whole market correction because of higher interest rates is interesting as it provides a potential buying opportunity but i think a lot of what apple sells is directly related to the consumers' ability to purchase stuff which is related to rates.