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  • Important Lessons Learned From Apple Over The Past 10 Years [View article]

    Ok, purely from the standpoint of current valuation, it is hard to say that Apple is overvalued. 12.8 times of annual net profit is by no means expensive for a company that is growing at 27% right now. Microsoft, which is growing much slower than Apple, is currently valued at 14.5 times of annual net profit.

    The key question, though, is over the next 10 years whether Apple’s revenue will keep on growing at this fast speed, at slower speed, not growing at all, or even contract. Another important question is whether the company can sustain its current high margin. I am more positive on the answer to the first question. Even if the company loses some of its “fashion appeal” in the eyes of consumers and hypes of new product introductions, it probably can still maintain certain level of market share and grow its revenue as global smart phone and tablet markets, which are still far from mature, keep on growing.

    I am less positive on the answer to the second question. Apple’s margin right now is very high for a high-volume electronic seller by any standard, similar to Sony’s margin on audio stereos 25 years ago, or IBM’s margin on laptop 20 years ago. Exactly how excessively high is Apple’s margin? From the view point of the utility of a tablet, Apple is charging consumers probably 10 times of what the gadget’s functions really worth. Look at the last hot discussion of the tablet world: Indians’ $35 tablet:

    Now, I don’t expect Apple to lose its brand name superiority and premium margin so fast. My guess is that it probably will be able to stay as the top brain in electronic gadget world for at least three more years. It’s margin and/or revenue growth rate will probably only drop gradually for the next 5 years. Of course, if the company is able to make other revolutionary inventions for consumers, its revenue growth and high margin may stay longer. It is just a little hard for me to imagine that kind of further revolutionary breakthrough keep on coming out even from even such an innovative company like Apple.

    So, for now I am setting my expectation of Apple over the next 10 years as IBM in 1990s. It will still grow at above average speed and be a good investment, just not the outrageously splendid investment it was 10 years or 5 years ago.

    Nov 20 01:45 AM | Likes Like |Link to Comment
  • Important Lessons Learned From Apple Over The Past 10 Years [View article]

    You are right. Nope, I by no way meant to say that I think there is a chance for Apple stock to give us another 10,000% return over the next 10 years, probably not even 500% return. I think at this point Apple is a good super cap company that more likely than not will give investors good return but not homerun return.

    As I said in the article, we need to identify next Apple and invest in its young age to seek extraordinary alpha. You can read some of my other articles to get a sense of what some other companies I am bullish on. I and my family have very extensive experience doing business in China and Taiwan. Therefore, I am more poised to identify solid Chinese companies that I think are current enormously undervalued.

    Nov 19 03:10 PM | 2 Likes Like |Link to Comment
  • Important Lessons Learned From Apple Over The Past 10 Years [View article]

    That's a far more difficult question to answer than what can be said about past 10 years of Apple as I did in my article. I'll give you a more thorough response of my take later today. In conclusion I am in a "buy but not strong buy" camp for Apple right now.

    Nov 19 03:03 PM | 1 Like Like |Link to Comment
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