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
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.