There are very, very, skilled investors, hedge-fund owners, traders, and speculators that are intimately familiar with every nook, and cranny of Apple's Cash Flow, Income and Balance Sheets.
Now - You can trade against these people based on your intimate industry knowledge of trends regarding IOS, Apple's new markets, Apple's unique position in terms of mind-share, Microsoft's Weakness, or Google's potential problems with market fragmentation on the Droid platform - these are all skills/knowledge that may give you a unique advantage.
But trust me when I say people (much) smarter than you with regards to all matters financial have declined to bid-up Apple, despite it apparently having a tsunami of cash about to come its way.
Once again - I'm not saying don't invest in Apple, I'm saying don't invest in Apple because you think you've identified some financial aspect that has somehow escaped the eyeballs of the ten-thousand odd people who make a living crunching these numbers every day and can afford to speculate and otherwise arbitrage these (seeming) value opportunities across hundreds, if not thousands of company's that are in this (or simliar) positions.
The problem is the very, very skilled hedge fund and institutional investors that are capable of moving a stock to stratospheric heights are judged on their performance on a month-to-month basis. The price action and patterns and trading Gods have lead them to believe that in the short-term AAPL is not going to go up very quickly (until it does, more on that later.)
Apple has essentially been going sideways for the last 6-7 months. While this makes Apple a bad trade, it doesn't mean Apple is bad investment. Zaky is saying that in 3 years Apple will be worth significantly more and thats hard to argue with. Those that have argued seemed to be completely out of touch with the company and focused on silly things like "Apple is not spending money on R&D because R&D expense dropping if taken as a percentage of revenue."
Speculators and traders aim to buy high and sell higher. Lots of money is sitting on the sidelines waiting for Apple to reach a new all-time high on above average volume before they pounce. Apple hasn't made a new high since February. I suspect these "very, very skilled" traders and speculators will jump back on board if and when Apple blows past $365.
If AAPL goes sideways for months at a time for months at a time, as it is apt to do, then these "skilled" pros take their money and put it in more exciting places until the stock comes back to life again.
Note that this "buy high/sell higher" is the exact opposite approach of long-term-minded Graham/Buffett value investors. While the stock is going through these periods of consolidation, it makes for a perfect time for long-term, individual investors to buy a piece of a great company at a ridiculously cheap price and not have to think about their money more than a few times a year for a very long time.
I doubt there are ten thousand Apple anaylsts. Maybe ... ten.
And they'll know each other. They'll read each other's papers, pressers and blogs. They'll be in the same analyst's tours and on the same conference calls. They attend the same parties, have friends in common and possibly went to Wharton, Harvard, Stanford for Yale together.
In short: they could easily be suffering from groupthink.
Oh, don't get me wrong - betting against the Apple _analysts_ makes absolute sense - In particular, for anybody on HN, I'd trust your insight as much, if not significantly more than the Apple "Analysts" - Very few people have Gruber's track record in terms of understanding where Apple is going to go, and even he has been off a few times (misjudged how successful the iPad was going to be).
I'm not talking about Apple Analysts, I'm talking about _financial_ analysts, who all see Apple's balance sheet, cash flow - and can make the same Analysis that the OP did, which is "Apple will have $300 Billion in Cash by 2015."
That's a decision to invest for financial reasons, nothing inherent in Apple itself. If those investors have declined to invest in Apple, it's because they have greater knowledge, understanding, and ability to comprehend what is likely to happen to the cash flows that Apple is experiencing right now than we do.
So, if you want to invest in Apple the "Company" because you think you understand it's future as a "Company" - great, I think you have a chance to out-perform the market.
But, if you want to invest in Apple the "Financial Statistic" because you think you understand how to value it's future based on NPV of future cash flows - realize the people you are going up against have been doing that type of analysis on companies for 8-10 hours a day for the last 20 years, and have declined to bid up Apple.
Investing based on ratios, like any other approach, has its pros and cons. The pro is that it is largely immune to subjectivity (assuming proper bookkeeping...); the con is that cross-company comparisons can be difficult because different industries can have radically different typical ratios.
I think that ratio analysis can serve two useful purposes:
* Detecting funny buggers. One or more ratios will often becomes skewed out of band when somebody is being creative with bookkeeping.
* Reality checking. This is a more general case of detecting funny buggers.
Finally, active share traders won't calculate purely on NPV, cash per share, etc. They'll be looking at share price growth and other shares may seem more attractive, for various reasons good or bad, regardless of the fundamentals.
Comments
There are very, very, skilled investors, hedge-fund owners, traders, and speculators that are intimately familiar with every nook, and cranny of Apple's Cash Flow, Income and Balance Sheets.
Now - You can trade against these people based on your intimate industry knowledge of trends regarding IOS, Apple's new markets, Apple's unique position in terms of mind-share, Microsoft's Weakness, or Google's potential problems with market fragmentation on the Droid platform - these are all skills/knowledge that may give you a unique advantage.
But trust me when I say people (much) smarter than you with regards to all matters financial have declined to bid-up Apple, despite it apparently having a tsunami of cash about to come its way.
Once again - I'm not saying don't invest in Apple, I'm saying don't invest in Apple because you think you've identified some financial aspect that has somehow escaped the eyeballs of the ten-thousand odd people who make a living crunching these numbers every day and can afford to speculate and otherwise arbitrage these (seeming) value opportunities across hundreds, if not thousands of company's that are in this (or simliar) positions.
The problem is the very, very skilled hedge fund and institutional investors that are capable of moving a stock to stratospheric heights are judged on their performance on a month-to-month basis. The price action and patterns and trading Gods have lead them to believe that in the short-term AAPL is not going to go up very quickly (until it does, more on that later.)
Apple has essentially been going sideways for the last 6-7 months. While this makes Apple a bad trade, it doesn't mean Apple is bad investment. Zaky is saying that in 3 years Apple will be worth significantly more and thats hard to argue with. Those that have argued seemed to be completely out of touch with the company and focused on silly things like "Apple is not spending money on R&D because R&D expense dropping if taken as a percentage of revenue."
Speculators and traders aim to buy high and sell higher. Lots of money is sitting on the sidelines waiting for Apple to reach a new all-time high on above average volume before they pounce. Apple hasn't made a new high since February. I suspect these "very, very skilled" traders and speculators will jump back on board if and when Apple blows past $365.
If AAPL goes sideways for months at a time for months at a time, as it is apt to do, then these "skilled" pros take their money and put it in more exciting places until the stock comes back to life again.
Note that this "buy high/sell higher" is the exact opposite approach of long-term-minded Graham/Buffett value investors. While the stock is going through these periods of consolidation, it makes for a perfect time for long-term, individual investors to buy a piece of a great company at a ridiculously cheap price and not have to think about their money more than a few times a year for a very long time.
I doubt there are ten thousand Apple anaylsts. Maybe ... ten.
And they'll know each other. They'll read each other's papers, pressers and blogs. They'll be in the same analyst's tours and on the same conference calls. They attend the same parties, have friends in common and possibly went to Wharton, Harvard, Stanford for Yale together.
In short: they could easily be suffering from groupthink.
Oh, don't get me wrong - betting against the Apple _analysts_ makes absolute sense - In particular, for anybody on HN, I'd trust your insight as much, if not significantly more than the Apple "Analysts" - Very few people have Gruber's track record in terms of understanding where Apple is going to go, and even he has been off a few times (misjudged how successful the iPad was going to be).
I'm not talking about Apple Analysts, I'm talking about _financial_ analysts, who all see Apple's balance sheet, cash flow - and can make the same Analysis that the OP did, which is "Apple will have $300 Billion in Cash by 2015."
That's a decision to invest for financial reasons, nothing inherent in Apple itself. If those investors have declined to invest in Apple, it's because they have greater knowledge, understanding, and ability to comprehend what is likely to happen to the cash flows that Apple is experiencing right now than we do.
So, if you want to invest in Apple the "Company" because you think you understand it's future as a "Company" - great, I think you have a chance to out-perform the market.
But, if you want to invest in Apple the "Financial Statistic" because you think you understand how to value it's future based on NPV of future cash flows - realize the people you are going up against have been doing that type of analysis on companies for 8-10 hours a day for the last 20 years, and have declined to bid up Apple.
I misread you, then.
Investing based on ratios, like any other approach, has its pros and cons. The pro is that it is largely immune to subjectivity (assuming proper bookkeeping...); the con is that cross-company comparisons can be difficult because different industries can have radically different typical ratios.
I think that ratio analysis can serve two useful purposes:
* Detecting funny buggers. One or more ratios will often becomes skewed out of band when somebody is being creative with bookkeeping. * Reality checking. This is a more general case of detecting funny buggers.
Finally, active share traders won't calculate purely on NPV, cash per share, etc. They'll be looking at share price growth and other shares may seem more attractive, for various reasons good or bad, regardless of the fundamentals.