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Follow me on twitter @ChrisDungeon In addition to writing for Seeking Alpha, I'm currently an Electrical Engineer turned Entrepreneur with a major focus on Long Term Investing. I've been investing in the stock market ever since I started my own car detailing business at 12 years old. I model my... More
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  • Why Warren Buffett Isn't Buying Apple

    One word - loyalty.

    It's no secret that Warren Buffet and Bill Gates are best of friends. So it shouldn't be a surprise to say that Buffett buying AAPL shares would be a big slap in the face to Gates. It would be analogous to Gates buying Pepsi stock to Buffett's roughly 9% ownership in The Coca Cola Company (NYSE:KO).

    Many believe that Buffett is staying away from Apple because it is out of his area of confidence. I disagree with that sentiment, as Apple is far from a complicated company. Apple maintains a simple product line that is luxurious in nature.

    One of Buffett's all-important investment tenets is pricing power. A measurement that easily allows a company to raise prices on consumers without losing sales volume. As a luxury brand, people have been willing to go out of their way to pay ample amounts for Apple's products. Why? Because Apple retains their strong brand image by giving us all the latest consumer technology contained within looks we desire.

    The Fundamentals Buffett Loves

    1. Strong Brand Image

    There's no denying that Apple is a strong brand, if not currently the strongest in the world. I'd say Coca Cola has Apple beat out on worldwide recognition, but Apple has them on pricing power and earnings.

    2. Pricing Power

    Pricing power is one of Warren Buffett's go-to requirements for buying any business. If a business does not have pricing power, it will be impossible for it to avoid competition and inflation from creeping in and eventually eliminating any and all profit margins.

    3. The Moat - Industry Leading Products

    Apple has yet to follow any of their competitors. In fact, every competitor tries (and fails) to make copycat versions of Apple's game changing products. Every one of Apple's competitors waits in the shadows for product releases, hoping they have enough time to reverse engineer before it's too late - See Zune, Android Phones & Kindle.

    4. Consistent Earnings Growth

    Going back to 2003, Apple has grown earnings at annual compound rate of an astonishing 104% - $68 Million to the current $41.73 Billion. In five years, that annual growth has come down to 64% ($3.5 Billion to $41.73 Billion) - still plenty phenomenal.

    Conclusion:

    There is no denying Apple's strong fundamentals - fundamentals that are in line with Buffett's investment requirements and would have him buying into Apple. I'm positive Buffett has personally done investment calculations on Apple at the current $500 level. As a value investor, Buffett can't shy away from Apple's obvious investment potential, but the fact of the matter is that he won't buy any AAPL shares because his best friend founded Microsoft.

    Disclosure: I am long AAPL, KO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Tags: KO, AAPL, long-ideas
    Jan 01 4:49 AM | Link | Comment!
  • Apple To Pay Brazil's Gradiente SA For iPhone Trademark

    In an effort to avoid major confusion, Apple will be forced into buying the iPhone trademark rights from Gradiente SA - a Brazilian company that started selling smartphones last week under the iPhone name.

    Users of this latest Brazilian iPhone release are being misled as Gradiente SA has installed Google's Android OS onto their trademarked iPhones.

    It is very doubtful that Apple will tolerate Brazilian's population (the world's sixth largest mobile market and fourth when ranked by smartphones) from getting the wrong idea about what an iPhone truly is.

    It is imperative that Apple intervenes immediately with monetary compensation for Gradiente in an effort to keep the global iPhone brand image untarnished.

    The question here isn't about whether or not Apple (NASDAQ:AAPL) with buy out the Brazilian iPhone trademark, it's a matter of when. The potential for future Brazilian Apple iPhone customers is undeniably huge.

    Disclosure: I am long AAPL.

    Tags: AAPL
    Dec 31 8:56 AM | Link | Comment!
  • 4 Likely Promises From Apple In 2013

    It's no secret that Apple provides us all with fresh and innovative products on a constant basis. The 2013 announcements will be slightly different for Apple. Besides the obvious releases for Apple, it appears inevitable that the release of an end-to-end Apple TV and a deal with China Mobile is in store for next year.

    The Obvious Two - iPhone and iPad

    Apple will continue their iPhone updates with the iPhone 5s and iPad updates with a slimmer and lighter New iPad, and a Retina Display iPad Mini.

    Most people (including myself) agree that the release of the New iPad and updated iPad Mini will take place sometime in March 2013. As for an updated iPhone, however, people feel the need to push an early June release. I disagree with those sentiments and believe that Apple will wait until the September/October timeframe. There's no guarantee, but we can find similar release cycles from Apple with the iPhone 4s & 5.

    This tells us that the majority of AAPL FY 2013 earnings will be from the iPhone 5 and not the iPhone 5s.

    Apple TV

    We all know that Apple currently sells an Apple TV box that connects to any HDTV. Those little black boxes have totaled about 10 Million in sales as of 2012 year end estimates. That shows us that people have already started quietly investing in Apple TV.

    I would venture to say that most of these early adopters would be down for purchasing an Apple TV, especially if they are looking to treat themselves or their families for the 2013 Holidays.

    Other supporting facts:

    In a recent interview, Tim Cook mentioned that the TV is an area of "intense interest."

    Steve Jobs mentioned in Walter Isaacson's biography that he "cracked" the TV.

    Well Steve wasn't and Tim isn't talking about the current Apple TV. They are talking about a full end-to-end TV system from Hardware to Software.

    Consider this - Apple has built a massive amount of Apple retail stores in the past few years. Doesn't that make it super easy to pick up an Apple TV?

    China Mobile Deal

    China Mobile (NYSE:CHL) currently has over 700 Million subscribers. Of those 700 Million, about 80 Million or 11.4% are also 3G subscribers - a drop in the bucket compared to the overall customer base.

    There are concerns with an agreement between Apple and China Mobile, mostly over revenue sharing and implementing the 3G network technology China Mobile uses into the iPhone. Regardless, at some point one of the parties will give in. The potential with that 700 Million customer base is too big to ignore.

    Conclusion

    For 2013, Apple will continue with their never-ending product announcements. However, the cycle will be a little different from the previous 2 years - the main difference here being a totally new Apple TV product announcement and an inevitable deal with China Mobile.

    Disclosure: I am long AAPL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I plan on purchasing more AAPL shares throughout the end of 2012.

    Tags: CHL, AAPL, long-ideas
    Dec 28 10:21 AM | Link | Comment!
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