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Jonathan Wagner

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  • Apple As The New RIM [View article]
    Apple has a ton in the bank, they can start buying income, why have they decided to do dividends instead?

    The main reason Apple is not a true value play is because it is difficult to ascertain the intrinsic value of a company that 50% of their revenue comes from a single product (the iPhone). Even the iPad was not as revolutionary as the iPhone.

    Any one who can guarantee that people will still be buying iPhones in 5-10 years is taking a pretty big risk. Value investors are looking at the long term and that is greater then 5+ years. There are some very important points to consider for Apple before taking a value position.

    1. Apple has not proven its ability to be innovative post Jobs. The iPad mini was not a true innovation, and the initial conversations regarding it happened before Jobs passed. Apple Maps was also not an innovation, it brought nothing truly new to the table and it failed even as a copy cat product.

    2. Apple is not hedging itself at all. Instead of buying income by acquiring companies, they are going to pour 2.5 billion out in dividends.

    3. Management is adhering to Jobs like philosophies without the results. Self cannibalization is fine if your bottom line stays the same, it is not good if it causes diminishing returns (in the case of the iPad mini).

    4. The ecosystem they have built relies on the sales of their hardware because it is a closed system. That means if iPhone sales drop by 10% that means income from their app store will also drop by X%.
    Jan 24, 2013. 07:19 PM | Likes Like |Link to Comment
  • Tesla Motors Set For Record-Breaking Q4 [View article]
    Does any one live near the Tesla plant? Seriously could some one just go and sit by their internal test track for like 2 hours, then we can all figure out how many cars they are actually making each day. If 2-3 cars are tested in a 15-20 minute window then it doesn't matter any of the other details, because the reservations are definitely there.

    Someone go Nancy Drew.
    Jan 24, 2013. 05:28 AM | Likes Like |Link to Comment
  • With Apple, What A Difference A Week Makes [View article]
    Scott, I agree with you, I am still waiting to see the true "post jobs" innovation. The iPad mini was inevitable and a copy of what other companies were doing, and apparently it is even cannibalizing their revenue. Maps was a complete flop and then they fired a senior executive who thought like jobs because he wouldn't sign a letter apologizing for maps.

    What is worse is that I think the iPhone is become stylistically dated (in the iOs mostly) in the same way the bright orange iMac needed to be refreshed so will the iPhone soon, but will they be willing to do it? There is something strange happening when people think the windows phone looks more advanced then an iPhone.
    Jan 24, 2013. 04:55 AM | Likes Like |Link to Comment
  • Apple Earnings: What's Next? [View article]
    Which innovative new products are you referring to? Since Jobs passed the only new thing they have rolled out that has had any success is the iPad mini, which they didn't do first it was a copy when they saw how much other companies were selling. Maps was a complete flop.

    Jobs never though the a small tablet was a good idea, and he might of been right.

    I am still waiting to see Apple's first true innovation post jobs.
    Jan 24, 2013. 04:41 AM | Likes Like |Link to Comment
  • Apple Earnings: What's Next? [View article]
    I need to find the report on the mice again, I am not sure they got that complex, though I would be interested myself. It was more like, what happens when we give them the same amount of food for a period of time, then reduce, keep it the same, or increase.

    Some recent research into dopamine and motivation is actually insightful, not just for financial markets (where it is highly applicable) but to life in general. You might find this video interesting:

    People seem to be a little obsessed with the day after, but that isn't necessarily a good indicator for what the future will be and here is why. If there are large amount of institutional traders with short positions and they see a massive amount of bid side pressure (people actively selling) they will take the opportunity to place large bid blocks to close out their large positions. This isn't to say they think the price will go up, but rather they are utilizing the event to maximize their short term profits without running up or running down prices on themselves.

    What happens is that these large bid blocks act as a support and when day traders don't see the stock dropping like expected or notice the bid side support, often times they incorrectly assume the support is from an accumulator, not a short closing out their position, this will result in a jump of price as the short term traders start pulling from the very sparse ask side of the market.

    Since the AH trading was down, I expect there might be a gap tomorrow. This gap will probably be the best opportunity for the large short positions to close out, the bid side support will hold up and then the gap will close. The dumb news market who knows nothing about short term trading will report some baloney about efficient market, and a bunch of day traders will hurt that go short in the morning. Anyways..
    Jan 24, 2013. 04:24 AM | 1 Like Like |Link to Comment
  • Apple Earnings: What's Next? [View article]
    I think they should spend more time and money marketing samsung and explaining to the world why they are threatened by them and why their products should be taken off the market.

    Why innovate when you can do marketing for your main competitors?
    Jan 23, 2013. 08:32 PM | 1 Like Like |Link to Comment
  • Apple (AAPL): FQ1 EPS of $13.81 beats by $0.37. Revenue of $54.51B (+18% Y/Y) misses by $220M. 47.8M iPhones, 22.9M iPads, 4.1M Macs, 12.7M iPods. Expects FQ2 revenue of $41B-$43B, below $45.6B consensus. Shares -4.3% AH. (PR[View news story]
    Mutual funds don't operate like regular retail investors. They will often use press or media events to close out large positions by doing the exact opposite of what everyone else is doing.

    The mutual funds aren't looking at the next 2-5 years, they are looking at the next 10 years. What they see is a company that hasn't released a single new good innovation since Jobs passed (the closest was the iPad mini, but other companies did the smaller tablet first), a company where 50% of their revenue comes from a single product that is starting to look dated (iPhone) and in addition is losing market share. They are also firing senior management that were critical in Apple's previous success.

    Jobs left a manager in charge not an innovator. Management is a very important consideration when dumping billions into anything.
    Jan 23, 2013. 08:18 PM | 2 Likes Like |Link to Comment
  • Apple Earnings: What's Next? [View article]
    Historically when stocks hit or miss estimates (even slightly) it usually starts a down trend. This irrationality is based in the biology of expectation, they have actually shown that in mice endorphin levels either stay the same or decline when expectations are met and not exceeded. Similar experiments have been done in humans with dopamine and endorphins. It might seem crude to refer to the mass market as mice, but it does explain the irrationality of the market.

    I applaud the author for pointing out the difference between a company's fundamentals and its stock price. Hoping for price appreciation simply because you believe a company might grow or not die in the future is a grave error.

    I would never buy or sell a stock because I believed it was topping off or bottoming out; that's what the losers say all the way up and all the way down. It's also why we have a market.
    Jan 23, 2013. 07:03 PM | 1 Like Like |Link to Comment
  • Apple (AAPL): FQ1 EPS of $13.81 beats by $0.37. Revenue of $54.51B (+18% Y/Y) misses by $220M. 47.8M iPhones, 22.9M iPads, 4.1M Macs, 12.7M iPods. Expects FQ2 revenue of $41B-$43B, below $45.6B consensus. Shares -4.3% AH. (PR[View news story]
    It can be dangerous to bet against mice. A stock hitting estimates and then declining is a very common story. It could be a death sentence for the stock's price, not the company, which is a common misconception people like to believe about the stock market.

    Some mutual funds will be forced to sell AAPL because they are no longer showing YoY growth metrics. This will make AAPL less of a growth candidate.

    Historically its P/B is at pretty decent low, which might now make it a value candidate. iPhone accounts for over 50% of their revenue. If you believe AAPL can continue to see growth in sales of the iPhone, it is a definite value purchase.
    Jan 23, 2013. 06:35 PM | 1 Like Like |Link to Comment
  • Apple (AAPL): FQ1 EPS of $13.81 beats by $0.37. Revenue of $54.51B (+18% Y/Y) misses by $220M. 47.8M iPhones, 22.9M iPads, 4.1M Macs, 12.7M iPods. Expects FQ2 revenue of $41B-$43B, below $45.6B consensus. Shares -4.3% AH. (PR[View news story]
    There was an experiment done on mice. When they received what was expected, there was not an endorphin increase. The only time there was an endorphin increase is when they got more then expected.

    A company hitting estimates dead on, or missing, is a loss. All things being equal, this may continue the already existing trend to culminate at a price / book settling.
    Jan 23, 2013. 06:05 PM | 3 Likes Like |Link to Comment
  • The Secret Of Warren Buffett's Alpha [View article]
    P/B can only be viewed in the context of historical P/B.

    Let's say you paid 10,000 for a 4 degree, and because of it 10 years later you made an additional 500k. To figure out the value of that 10k you have to discount it yearly, and then also discount the lost income over those 4 years you weren't working.

    Now if you went to an ivy league and your education cost 100,000 but you made 5 million, then that would still be a good investment. He calls this intrinsic value, his main metric for this is book value.

    Value investing is not just looking for stocks that are trading at parity, that is a gross over simplification. It's looking for historical precedent.

    If coca-cola has been selling for $5 for 2 liters for the last 10 years, $4 is a discount. If coco-cola has been selling for $10,000 for 2 liters for the last 10 years, $9,000 is a discount.

    What is too-good-to-be-true is based on historical prices. If I told you I could get a latte for 50c, you would think that was crazy, until I told you I was a time traveler.

    Anyone who would discount IBM because they have a high P/B doesn't actually understand what value investing is.
    Jan 23, 2013. 04:36 PM | Likes Like |Link to Comment
  • The Secret Of Warren Buffett's Alpha [View article]
    Zach, he doesn't just buy stocks with low P/B he buys stocks with consistent P/B because that means the stock price keeps pace with the growth of the company. Every company he purchases has this characteristic, none of them have high P/B volatility.

    It is a very simple concept, if the P/B is a straight line but a company's book value continues to climb, that means its price has to be rising with its book value. The best insights into his strategies are actually his letters to the share holders of Berkshire, not any third party books.
    Jan 23, 2013. 12:34 PM | 1 Like Like |Link to Comment
  • The Secret Of Warren Buffett's Alpha [View article]
    Chump, this is what people don't understand and why a lot of these valuations don't make any sense.

    Berkshire is NOT a mutual fund anymore, they are a conglomerate. Mutual funds do not have 260,000 employees and 10 billion dollars in net income per year. Berkshire as a company makes more net income then Google.

    Several years ago Buffet started buying companies out right, the huge cash reserves he has comes from revenue from the companies Berkshire owns.

    Sooner or later people are going to catch on that Berkshire is not a mutual fund and it is actually a very profitable company. It is as profitable if not more profitable then some companies trading at 3x price / book.
    Jan 23, 2013. 12:26 PM | 1 Like Like |Link to Comment
  • Are Visa's Days Numbered? [View article]
    My old Motorola Atrix had a finger scanner, I doubt Apple will be the only one that offers this.
    Jan 18, 2013. 06:17 PM | Likes Like |Link to Comment
  • The Secret Of Warren Buffett's Alpha [View article]
    The problem is Berkshire is no longer just a mutual fund, they are a massive conglomerate that makes 150 billion a year and has 260,000 employees. Their share price book value has increased 513,000% in the last 40 years. You're looking at price motion only, the problem with that is price motion is caused by a series of events, one of which is year over year revenue growth.

    The reason they continue to grow is that when the market takes a huge hit, they don't. You're comparing a company to a mutual fund. The reality is that it is impossible to sustain say a 20% growth rate per year, if you could do that you could be trillionaire, it however is not impossible for a company to have 20% growth per year for extended periods of time. That means over the long term Berkshire can continue to make money because stocks always fluctuate at a multiple of their book value.

    When people invest in Berkshire, they aren't investing necessarily into something that can out perform the market, they are investing in a company they know will continue to grow and they just expect that the share price will eventually catch up.

    People keep comparing Berkshire to mutual funds, but it is not a mutual fund. It is a massive company that has quarterly YoY growth of 21.67%, the moment people realize that Berkshire is no longer a mutual fund, they could see a massive increase in price / book (currently 1.25)

    IBM, which has twice as many employees but more net income has a price / book of 10.25
    Jan 18, 2013. 05:57 PM | 2 Likes Like |Link to Comment