33_Alpha's  Instablog

33_Alpha
Send Message
I am a programmer, a researcher and a computer scientist on artificial intelligence. My past lives include working on two startups, two universities and one industrial research institution. I have been trading since 2004. Researching stocks is my hobby as well as an important source of income.... More
  • If Apple Fell To -$100 Today 2 comments
    Jan 23, 2013 11:22 PM | about stocks: AAPL

    Let us do a thinking exercise: suppose after earnings today, Apple goes down to -$100. Or P/E equals to around -2. Yes, P/E doesn't go to negative. Also let's say if it go to negative is because the earning is negative. But let's say you play along.

    So the cap size becomes something like -$90 billion. You realize you lose quite a bit of money. But let's say you don't look at your asset for the moment. Just look at the numbers from earnings. Would you conclude that Apple is sinking? Would you decide to sell all your Apple stocks? Apple is doomed? "Apple's empire is falling apart?"

    More importantly, if you own the stock, someone needs to offer you $100 per share. Would you accept that deal? Or would you say "Apple is doomed, it falls for 120%, it *only* has $130 billion cash, it *only* makes ~$50 per share. So I am not going to accept the ownership of this forsaken company!"

    I am sorry bears, if I were you, I would run to get more Apple stocks.

    Now translate all these to real-life. Of course, Apple didn't drop to -$100, it drops for 10% AH. Effectively, it means P/E = 10. Forward P/E =~ 8.

    So...... it is cheaper than McDonald (17.6), Coca Cola and oh.... P/E of S&P (17).

    Once I think in this way, the current pessimism of Apple is uncalled for. Not to say it is paying dividend.

    The truth is if you invest a company for long term, you don't really care too much for its short-term variations. Unless you can derive something bad is happening in the company. But I fail to see one, are there any shenanigans from managements? Do they fail to have a valid business models? Do they fail to make money? Are they overpriced? Those are factors which matter to me when I do long term investment.

    Some ask how "long term" is long term? If you ask me, let's say 500 years.

    33_Alpha

    Disclosure: I am long AAPL.

    Stocks: AAPL
Back To 33_Alpha's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (2)
Track new comments
  • Micro Magic
    , contributor
    Comments (59) | Send Message
     
    Exactly the kind of article that SA will refuse to publish as an article. Too financially based and too simple. Tomorrow will be a media driven bloodbath.

     

    I just went out and cancelled my trailing sell stops. Falling knife my @$$. If it throws off cash like this thing, I can afford a few cut fingers.
    23 Jan 2013, 11:28 PM Reply Like
  • 33_Alpha
    , contributor
    Comments (165) | Send Message
     
    Author’s reply » Thanks for your comment. On long term investment, I am afraid I am usually "too financially based and too simple".

     

    But in long term investment, really, are there knowledge which is more complicated than "money earned has to be bigger money spent" and.... compound interest.

     

    33

     

    23 Jan 2013, 11:34 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

  • My 12 Followers: thanks for following me. One day I will write a good SA article and share all my thoughts on stocks and investments.
    Mar 22, 2013
  • Before $YHOO took off last year. This is how I view its problem. I am glad that Mayer was taking the advice http://seekingalpha.com/p/72ql
    Mar 22, 2013
  • Getting sick, so I wrote an article on Apple for fun. "Why People Say What They Say About $AAPL" http://seekingalpha.com/p/yshh
    Mar 6, 2013
More »

Latest Comments


Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.