Long only, deep value, value, long-term horizon
Long only, deep value, value, long-term horizon
Contributor since: 2013
Good article, but I wouldn't necessarily call it unbreachable. We have seen other search engines come and go when Google usurped them, the same with MySpace. But like you say, I think the facebook moat is a bit wider to breach as they have come a lot farther along than these others to be intertwined in the lives of internet users.
Great article as always Aswath. You have communicated the differences in a very understandable manner for all.
One part of this drop has to be attributable to the drop in gold over the last year of about 20%.
Good analysis.
Any idea when the statment by BOJ is likely to be released?
I sure hope they dont come up with something like the car homer simpson ended up designing for Uncle Herb which ruined him!
See link below for reference
This article is way off in my opinion. The long term securities are mostly held in highly liquid instruments. They are just held in the long term category as AAPL has no intent on selling them, and rather hold until maturity.
This makes sense, no point in leaving all their excess earnings that is not need in cash where it wont earn anyhting at all.
All accounting firms are generally independent but operate under the same banner. For example, Deloitte in the US is independent to Deloitte in Australia. They are just a part of the same network in this case and are the Chinese/Hong Kong unit of Mazars.
Furthermore, the accounting firm being used is not the main crux of this article. Nothing in the research is flawed.
I think people who are "devoted" in this case are investors who hold positions in the stock. Any bad news about a stock they hold here on a SA brings out a primal defensive mechanism in them.
We see this all the time on SA, where holders of a particular stock cannot handle any criticism of it. It's understandable from a psychological standpoint, they have money tied up in this investment and don't want anything to negatively affect them.
It's fine to have differing opinions, just like the author is allowed to have his opinion here. Lets have hearty useful discussion.
You ecosystem discussion is certainly that. It has to be agreed with on some levels, this certainly has helped keep MSFT around. THe companies Ive worked for certainly have been "stuck" in a sense with the MS OS as changing is just too much of a massive ordeal and cost for probably not enough benefit.
My apologies as well, I meant to say inferred in the comment,
The usual flaming on this site has been enacted. Nevertheless everyone is entitled to their opinion.
Firstly, the article does not state it is a bad investment and at current levels is on key. Secondly, it merely states at this stage to invest at a higher price is high risk. This is clear with 83% of the reserves being an indicated amount. There is a reason the market price is currently at what it is it seems and it will be a good time to invest when they can improve the estimate.
Fantastic article James. Really resonates with me here. I think your idea on valuing AAPL in this manner is a very smart way of thinking about it. Was going to write similar, but you beat me to it! well done, look forward to reading the next one.
1. I know Hewitt, sorry I did not make it clear in the notes.
2. Thanks for the feedback. Hope to get some more time to start putting out some more (hopefully) insightful material soon.
It is a full year forecast financials. However, due to the valuation being conducted at start of year (i.e. cashflows related to oct to dec are not part of the valuation as it is a past event), they have been removed. This was just done in a simple manny by removing a quarter or multiplying full year result by 0.75. I just applied this to the FCFE as I wanted to keep the other values above this line in full year terms so it would be easier to relate to the previous 2013 year growth levels etc.
I'm sorry if you can't follow this but I haven't got time to run through the simple mechanics of how a DCF operates. So I hope what I have written explains this to you now.
This is because the amount is adjusted for 9 months of the year and 3 months earnings are already recorded (ie Oct to Dec). Not sure if I made that clear in the addumptions. This .75 of the year is also taken account of in the discount factor.
Sorry if this was not made clear in the assumptions.
Thanks for the feedback guys.
As noted it certainly is an exciting investment, and this could be a good way to limit risk, or make some gains in the short term for those holding onto it who strongly believe in it.
Appreciate your comments. And they are warranted in part. Also good to see you are not one of those who gets on here and bashes anyone who may make a few statements that seem a bit critical of AAPL. In all they are a good company.
You are correct that these indefenitely reinvested earnings will likely be reinvested, although, as can be seen AAPL has so much cash, much of it is going into the moeny markets. Nevertheless, even if your statement is correct, which I'm sure in part if not all is correct, these are still profits that are not being taxed in the US, that if their transfer pricing were "fairer" or reflected the real business situation better, mroe of these profits would have to land up in the US.
And yes, this is not necessary illegal, most tech firms do it, and I hope I enver suggested it was in anyway. But the point is, when it comes to transfer pricing, the burden is on the IRS, and they will try quite hard one would think to get a hold of some of these earnings, 5 billion is a lot of money (yes, unlikely they would get all. And the fact is year on year the IRS has been increasing their audit teams, especially transfer pricing, to get better quality staff, be able to investigate more, and hopefully build and win some strong cases.
The fact is AAPL is only paying 1.9% tax on foreign earnings (like many other techs), and this is where a bigger portion of their profits are earned. This creates a high tax risk when its seen as so low and therefore, there is this chance it MIGHT happen, or certainly that regulatory change may come about.
The article is merely a tool to give investors an idea of what may happen to AAPL should such actions start looking likely. Its certainly no reason to get out of AAPL yet for those in it.
Thanks for the comments.
Absolutely not. I have no political affiliations. Further the article never states what is being done is illegal. You are correct that it is all within the rules.
Further, it highlights the potentially precarious position AAPL could be in if investors see any hints at changes to these regulations or IRS court challenges to them or other multinationals doing the same thing. Fact is the US govt is targetting multinationals quite heavily these days as they need tax revenues, so its something to be aware of in the current environment.
yes, incorrect though, although every analyst has their won interpretation I guess. But look at it like this, as Apple makes the following entry into their tax calculation... "Indefinitely invested earnings of foreign subs" to reduce their tax bill. Further, simple calc... they earned 55 bil in pre tax profits. By 35% gives a tax amount of 19 bil, yet they paid only 14 bil in tax. This 5 bil difference is mostly related to the earnings left in the foreign subs.
Thanks for the feedback. But the base case is rather to show that AAPL is good value at very reasonable base estimates and without being able to continue current growth for too long. Those who are bulls can up this and see even more upside. Sorry if this does not come through clearly in the article. In future will take note and try to make it clearer, perhaps even do a bull case estimate.
Yes, this is mentioned in the article about the state of receivables being a risk. Number 2, of Risks mentioned.
Very interesting that this company is generating a lot of feedback. Seems like we have quite a few people interested in them. As it seems, a lot of signals point to a comeback with recent events. However, there are the outlined risks - All all of them pointed out in the article. And as you say, a prudent investor should weight them up before taking a position.
Apologies. This is correct (newswire I read was incorerctly dated). But the change was due to the company wanting lower fees - "The Mazars' decision to resign as the Company's independent auditors followed the Company's inability to negotiate lower fees for Mazars' services "
This is fairly common in this day and age.
Nevertheless, as you point out this does increase financial reporting risk, as also pointed out in the article when dealing with Chinese companies. But keep in mind there were never any issues found by Mazars. Investors need to decide if they are willing to take on this risk or not.
Mazars did not drop them, mazars was appointed as the new auditor
"its Board of Directors had appointed Mazars Hong Kong as the Company's new independent auditors"
But yes, as mentioned, this is the great risk with investing into chinese companies as mentioned.
Thanks for your comment.
I agree it could be seen as an issue. But we have to have confidence in the auditors for all companies we analyze, otherwise we will never be able to do our jobs really. Also the new auditor based appears to be Mazars, a quite well respected global network, allbeit not a big 4. Plus "The decision to change auditors was not the result of any disagreement between the (former Auditor and BSPM) on any matter of accounting principals or practices, financial statement disclosure, or auditing scope or procedure."
But certainly for some investors it is worth taking note, and as mentioned in the article, this is a higher risk with investing in China, the legitimacy/reliability of financials.
Thanks for the feedback. They are certainly a company worth monitoring, along with the "hot zones" around them in Africa.
This could be true. But increase has been significant and should be taken into account.
If the US economy is looking better, this bodes well for the EU economy as well of course.
But will take this into account, and perhaps give less waiting to this indicator. As it stands we have only given it 10% weighting for the very reasons as outlined above. But should still be noted in that pool of indicators in our opinion.
Thanks for the feedback.
Thanks for the input
On point 1 - I think there is some attribution to higher confidence, as if there was none investors would avoid stocks, and certainly even if it was some as of what you suggest, it would not be such large increases in markets as we have seen.
On point 2 - the analysis is not pointing to a recovery just yet, but that we are in a neutral phase.
Thanks again!