Seeking Alpha

KRV

 
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  • Is Apple Delicious At $500? [View article]
    As a hold, yes, but not as a buy, given the overall market levels. Investors have had many chances to buy in the low $400's. That boat has probably sailed for good. Thanks for checking on my old article!
    Dec 3 05:19 AM | 1 Like Like |Link to Comment
  • Is Apple Delicious At $500? [View article]
    Interesting and cynical explanation to the mystery of AAPL's price movements. But considering the characters on Wall Street, who knows, anything's possible!
    Jul 3 04:45 AM | Likes Like |Link to Comment
  • Apple's Return On Capital Employed Is Not Sustainable [View article]
    @Sid. Thanks for your detailed comment. I agree with you that metrics like ROCE/ROA cannot be applied blindly. For example, R&D is a strategic 'expense' and is not capitalized to begin with. It is precisely because the benefits are unknown and can be substantially valuable to any company (if the R&D is successful). I think it is helpful to look at a company's investments into 2 buckets - one that comes from the P&L side (Expenses) and the other from Balance Sheet (Capital Investments). Strategic decisions that have 'unknown' future value, notably R&D, are paid from the P&L side. Spending $0.5 billion for a new R&D centre, though it might involve capital elements (like building/equipment etc.), is still largely a strategic expense decision whose future benefits are unknown. Note that any equipment purchased in the R&D centre can be expensed or capitalized, depending on its potential long-term use or not. The R&D staff, presumably the bulk of a company's R&D costs, are always expensed.

    On the other hand, if you take money out from Balance Sheet for a specific investment initiative, you are making a 'capital decision' and so the metrics of ROCE/ROA apply. Buying or building a manufacturing plant, buying IP assets or building new Apple stores are paid from the same capital asset pool on the balance sheet side, and therefore, they can be compared with each other on the same metrics as to their relative value addition potential.
    Dec 12 11:30 PM | Likes Like |Link to Comment
  • Apple's Return On Capital Employed Is Not Sustainable [View article]
    ROCE is calculated as Operating Income divided by (Total Assets - Current Liabilities). Since I am only excluding CL from the denominator, all the cash (both short-term and long-term investments) are included in the formula. Whether you 'employ' the cash at 2% of 4% does not matter, because the numerator is 'operating income' and interest earnings would be treated as 'non-operating' income.
    Dec 12 12:14 AM | Likes Like |Link to Comment
  • Apple's Return On Capital Employed Is Not Sustainable [View article]
    @Oldwarrior. I clearly said in the article that we are not privy to BOM costs - that's impossible to have access to. What is important, though, is whether Apple will buy from Intel at the right cost structure or get caught up in the 'wave of internalizing', where they want to own everything, which is not value-adding to investors. Intel's ROCE and ROA pale compared to Apple's, so any actions of Apple that mirror what Intel already does is not likely to be value-adding to Apple investors. That's why I compared Intel and ARM's return metrics - Apple should not do anything that either of them can do (probably better). Regarding Foxconn, Apple went all in knowing the risks because the costs were incredibly low, which allowed Apple to capture a large %age of the value chain (see iPhone4 data in my earlier article: http://seekingalpha.co...) Apple should focus on what it does best, that is, bring out great new products and new stores that continue to be highly profitable. Everything else recently announced is a distraction and clearly, not as value adding from a ROCE perspective.
    Dec 11 06:14 AM | Likes Like |Link to Comment
  • Apple Dumped ARM's Designs In iPhone And iPad, But Nobody Noticed [View article]
    Ashraf, you brought out an important perspective in this article, which the mainstream media ignored. I have referenced your work in my article (http://seekingalpha.co...) as it gave an interesting perspective into Apple's internal decision-making process. Thanks.
    Dec 11 05:59 AM | Likes Like |Link to Comment
  • Apple Trading At 2.56x 2016 Cash Flow [View article]
    I don't know about 2016, but I feel we are approaching a good entry point for long-term investors at $475-500 levels (http://seekingalpha.co...).
    Dec 11 05:29 AM | 1 Like Like |Link to Comment
  • Is A Chance To Buy Apple At $400 Coming Soon? [View article]
    Your article assumes even more pessimistic scenario than what I estimated (http://seekingalpha.co...). I still feel $475-500 is an attractive entry point for a long-term investor. I understand the issues are significant (http://seekingalpha.co...) but given the strong investor sentiments in favor of Apple (the comments above are but a sampling!), I find it difficult to imagine it selling much below $500 for long. There is a chance for a spike after the holiday quarter results come out in late Jan.
    Dec 11 05:24 AM | 2 Likes Like |Link to Comment
  • Apple: Time For A Condor [View article]
    @madeleinelee. I agree with your comment, coming especially from an AAPL owner. I tried to highlight in this article(http://bit.ly/Z9hivO) about Apple's ROCE based on recent decisions of Mr. Tim Cook, but the perma-bulls are in denial.
    Dec 11 05:14 AM | 1 Like Like |Link to Comment
  • Apple's Return On Capital Employed Is Not Sustainable [View article]
    Thanks for your inputs. Please see my 5-point reply above for the first comment. Can you elaborate on "why it does not apply" here? Clearly, everyone is fixated on $120 billion cash hoard, when it is earning piddly 2%. If Apple cannot earn better return on its Long-Term Investments than plunking it in a T-bond, shouldn't Apple return it to investors who can decide what to do with it? Are you implying that the piddly earnings yield of any company's cash reserves is a benchmark for capital decisions inside that company? What about opportunity cost for shareholders? What's wrong in using current ROCE or ROA as metric for capital decisions? Just because there is cash lying idle, should a company dispense with a prudent capital allocation method?
    Dec 11 02:36 AM | 1 Like Like |Link to Comment
  • Apple's Return On Capital Employed Is Not Sustainable [View article]
    @Grammar. I agree with you entirely from a larger economic and 'public good' perspective, and 'creating jobs' is what public servants talk about from their pulpits but with not much concrete results. However, a company's primary objective is to add shareholder value. That's why we all invest and presumably read SA articles regularly (to get that edge on where more value can be obtained). Pride is important but investors can't retire on it or take it to the bank.
    Dec 11 01:55 AM | Likes Like |Link to Comment
  • Apple's Return On Capital Employed Is Not Sustainable [View article]
    @grahamjim. I agree with you that these questions also need to be asked from a technical and marketing standpoint. Your third question is especially a strong operational reason why there should not be a rush to 'insource' because that's the flavor of this season. It's easier to deal with the failure of a partner's design than your own because of strong 'sunk cost' bias. Thanks for your inputs.
    Dec 11 01:36 AM | Likes Like |Link to Comment
  • Apple's Return On Capital Employed Is Not Sustainable [View article]
    If you don't agree with the thesis of my article, please point out why (save the sarcasm without any compelling logic). I don't intend to give Apple any advice. My article says that a shareholder-responsible corporation must offer at least an explanation of their recent capital decisions from a value-accretion perspective.
    Dec 11 01:06 AM | 1 Like Like |Link to Comment
  • Apple's Return On Capital Employed Is Not Sustainable [View article]
    Return on Capital Employed is a 'made up' metric? ROCE is by far the most critical metric for any company deciding on how to spend a balance sheet asset. It's been around for ages, and widely used, by responsible corporations.
    Dec 11 01:02 AM | 1 Like Like |Link to Comment
  • Apple's Return On Capital Employed Is Not Sustainable [View article]
    What I asked is indeed the right question. Please see the detailed reply I wrote above in response to earlier comment.
    Dec 11 12:58 AM | 1 Like Like |Link to Comment
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