He also doesnt have much experience investing in tech, IBM hasnt exactly panned out for him. Certainly a vote of confidence for the company and warren does love him some cash flows.
^It is not a Buffett pick.
Seems a little odd they wouldnt consult with him before taking that large of a position? Interesting though, Ichan & Tepper out, Berkshire in. Could certainly provide a nice return if its story plays out well.
Why would they consult with him, Buffet has said on several occasions that he does not meddle with their decisions and that he does not understand tech companies.
Not really that large of a position if you consider Apple’s market cap and the size of berkshire’s investments portfolio ($112B on dec31). They could probably exit the position in one day if trading volume was abnormally large and hitting the ask.
I will spare everyone the random anecdotes about what I heard some various friend/family member/stranger on the sidewalk say about the Apple ecosystem or whatever. They’re not very useful in making investment decisions, unless you want to participate in the volatility driven by the retail shareholder base that is already more pervasive in Apple than just about any other mega-cap name.
Instead, I recommend taking a closer look at the numbers across the supply chain. Here are six reasons why at $100/share I would consider selling AAPL and buying GOOG (which I have been bullish on since late 2014 and have discussed here previously - think it goes to $950-1000 by end of 2017):
(1) Premium smartphones as an entire category is essentially devoid of growth (global unit sales globally are forecasted to be flattish for 2016), (2) AAPL probably is no longer gaining share if you consider they’ve underperformed industry unit growth in recent quarters, (3) iPhone unit and pricing trends have been negative for several quarters in a row, (4) there is purportedly limited new product features coming out in the iPhone 7, and (5) there have been tepid readouts on iPhone 7 builds in recent quarters from key supply chain participants including Taiwan Semiconductor, Foxconn, and the RF guys.
Also, (6) Nikkei/Bloomberg just reported a piece this morning that AAPL will likely take three years between full-model changes of iPhones, as opposed to the historical two-year cycle. If that isn’t a tacit admission that the iPhone isn’t a growth engine for the company anymore, I don’t know what would be.
AAPL shares rallied hard the last couple weeks on short covering and a specious report that iPhone 7 units would be in the 72-78 million range for 2016, which would contradict everything you’ve seen from the supply chain and “rumors” of what the iPhone 7 will look like.
Some would suggest exiting this potential value trap and consider buying again if it pulled back to $90 and ahead of the iPhone 7 release which will probably be a positive catalyst. But bears that are short AAPL think there’s downside to $75-80.
SUNE BROS
The first four (particularly the impact to margins as competition, slowing innovation and slowing growth take a toll) are what I’ve been saying since day 1.
I don’t understand how something can be a sell at $100 but a buy at $90? At a 10% difference I’d stay out of the stock completely
Currently AAPL has no defined plan for future growth. It is still relying on iPhone sales (which do have room for growth in the int’l markets)
iPad and apple watch were decent attempts but their product life cycle peaked before the iPhone! I think Apple missed out big time on capitalizing on their cash flow by ‘buying’ out competitors and future home runs. They have stagnated for far too long.
AMZN and GOOG are the way to go in terms of tech investments.
10% difference on a mega-cap is huge, especially if you’re L/S and meaningful for long-only as well given AAPL’s weighting in the benchmark.
Apple Watch is getting a lot of traction. Seeing a lot of people wearing these, both young guys and senior folks.
it sells for 10x earnings with similar fcf multiple. nearly a third of the stock’s value is in cash. downside is somewhat covered.
90% of industry profits. double digit eps growth in the last 10 years. with this they can crush the competiton simply by lowering price.
the biggest risk here is that my phone is so good that i do not need to replace it. the next phone i buy will still be apple. simply cuz everyone has it.
there’s actually an article recently that talked about how owning an iphone is actually a lower cost simply because of the resale value.
no brainer imo. im totally ok with it not growing. its a value play.
could be a value trap. considering phone tastes do change a lot. i still remember when bbery. or nokia’s flip.or tmobile’s sidekick was the coolest phone. but i’ll take my chances that iphone continues to dominates the next 10 yrs.
i don’t think the iphone is as price elastic as your are assuming. i’ve never met somebody who said “i’m buying a samsung because its $100 cheaper than an iphone”. phone manufacturers tout the cheaper price but most phone consumers don’t even think about it. you’re either buying an $800 phone or you’re not. most people who own samsung sincerely prefer samsung. if price mattered, BB would not have a market share of less than 1%. further, profits don’t matter for any phone manufacturer as they all either make enough in the phone business to get by or they have other businesses to support their phone business and will always remain competitive on price.
also, i see 90% of industry profits as a bad thing not a good thing. past EPS growth means nothing as well.
you can’t say they have 1/3 of the stock’s value in cash when they actually have $90B in net debt. you don’t count cash when there is offsetting debt.
i think the stock could trade 20-30% higher but only due to relative valuation compared to other giant tech companies. it’s impossible to fall in love with the apple story at this point and be looking for 50%+ returns.
Excellent.
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Well, this rally would be really awesome, if I hadn’t sold calls against my position.
It’s interesting how short-term the market has become. We all knew new iPhones were coming, and we all know users eventually upgrade (they may sit out a cycle, but they upgrade next cycle, they ain’t switching to some crappy Samsung). Yet you’ve got this mega-cap swinging around 28% this year “it’s the end of the world, oh no wait it’s awesomeness”.
Agreed. I thought it was insane that it was trading under $100/11x earnings. Glad I stocked up.
getting close to fair value. another 10% maybe.