Apple: The Most Undervalued Large-Cap Stock In America [View article]
Apple suffers from a different issue in large numbers. The stock is so widely held that it can't be accumulated in huge increments by institutions who are already at their limits on what they can hold in AAPL. With a relatively flat economy and a finite amount of capital to invest in equities, there isn't institutional money available to put into AAPL en masse.
Apple: The Most Undervalued Large-Cap Stock In America [View article]
Think of stock investing as a kind of legal ponzi scheme and you'll understand part of the reasons that Apple doesn't trade anywhere close to what its fundamentals indicate. EVERYONE knows about Apple and its monstrous fundamentals. We need fresh investors or the current longs need to continue pumping cash into shares of stock. If you bought Apple at $80 or so, are you more likely to be buying or selling Apple at prices of $375 or so? Relatively recent investors need even later arrivers to the party to continue to propel the stock forward.
I'm long AAPL because of the company's tremendous fundamentals but understand full well the market dynamics that prevent the company from going straight up in value. Plug Apple's numbers into the Graham formula for valuing a stock and you'll be stunned to find that Apple would be priced in the thousands of dollars per share. Apple can't take off for several reasons: (1) Its huge market cap. There's a finite amount of investment capital in the world. Institutions are severely constrained in how much they can pump into any individual stock. Apple is already widely held. Unless the broad economy is growing at a fairly healthy rate, Apple's not shooting straighting up no matter how good their numbers are. (2) Apple's liquidity puts it in the front of the line w/ shorts when there's a soft market.
So Apple is a victim of its size and liquidity. Reduce Apple's size by 50% or so w/ a proportionate reduction in its EPS, et al and the stock would be growing much more robustly.
Apple is a victim of its size and liquidity. Of course its fundamentals are fantastic, but the stock price will never fully reflect the fundamentals. In soft markets, Apple is the first stock that shorts look to because of its liquidity. There's a finite amount amount of money in equity markets. Institutions, in many cases, are already maxed out on what they can put into AAPL. Apple's fundamentals are great, but you can't keep your head in the sand and ignore market dynamics.
Apple: The Most Undervalued Large-Cap Stock In America [View article]
Apple is the most widely held stock by hedge funds. The stock is so liquid that it gets manipulated up or down in planned trades at their whim. Those are the unfortunate facts. I watch the buy/sell action on this stock every day and the likelihood that it gets artificially beaten down for the benefit of big traders is 100%.
If the Intelligent Investor told you to paint your face purple and dress like a chicken, would you do it? Apple famously is just the opposite of a company that makes widgets. Their competitive advantage is in the quality, perceived or otherwise, of their products, which is how they're able to get the margins that they do. Buffett looks for companies w/ a durable competitive advantage. Apple has that with a huge customer base who will only buy their product for years to come. Buffett holds or has held huge positions in Coke (sugar water), Geico (cheap auto insurance), Gillette (razor blades), Dollar General (cheap junk). I'd argue that all of those companies produce easily copied products, but they have 'share of mind'. Apple has that in spades.
Apple: The Most Undervalued Large-Cap Stock In America [View article]
Here's why Apple underperforms its fundamentals: (1) Huge market cap which requires seismic shifts to move the price appreciably and sustainably higher (2) institutional restrictions (2%, no more) on individual holdings (3) High liquidity which makes a short play simple in soft patches (4) Fat and happy long-term investors. Apple longs spend their days preaching to each other about the virtues of their company. The tree of prosperity needs to be refreshed w/ the blood of newbies.
Another commentary in which the writer is preaching to the choir. Everyone knows about Apple's awesome fundamentals. It's the most liquid and widely held stock in the market and therein lies the problem. Apple needs new investors or another blowout earnings release to drive its price up. The stock doesn't have enough conviction w/ the longs and won't until the next earnings release. It's a range bound stock and has been for the last 5 months. It's in the low end of the range and won't breakout without killer earnings. Mutual funds that hold Apple can't buy any more. New money has to come in.
A company doesn't achieve the kind of success that Apple has because of just one guy. Reading the hagiographies about Jobs at times becomes laughable. You'd think that Apple was 1 guy and a bunch of flunkies. Jobs greatest skills were as a salesman, borrower of technology and negotiator. Most of the original ideas for the first Apple computers were 'borrowed' from Xerox. The iPod technology should've belonged to Sony. Of course he was brilliant, but he was able to convince top people to join him and he unabashedly stole ideas from others. Apple will go on w/o Jobs.
I can confirm this analysis. I was in Hong Kong last month for business, working w/ a couple of folks from China. Apple products are a near obsession among the Chinese. Apple's biggest problem currently doesn't seem to be on the demand side, it's that they're seemingly having difficulty filling all of the demand for the products. My worry as an Apple investor is strictly on the supply side.
Why Apple's Cash Hoard Is Not A Problem [View article]
Dividends not reinvested will decrease the share value. A stock buy-back and/or split are non-events. Acquisitions are usually beneficial to the acquired company and detrimental to the acquiring company (from a share price perspective). Apple is in a paradoxically difficult but enviable position with all of that cash.
Why Apple's Cash Hoard Is Not A Problem [View article]
One man's KILLING OF THIS STOCK is another's buying opportunity. If you love Apple's fundamentals, you should be accumulating it at every sell-off. Check the history of Apple stock over the last 10 years, 5 years, 3 years, 1 year. Just because it's bouncing in a range over the last 4 months, when the stock market has been on life support, is fairly meaningless. That being said, I'd love to see the stock price dump further to pick up cheaper shares. If you expect instant gratification from any stock, you probably shouldn't be in the market in the first place.
Why Apple's Cash Hoard Is Not A Problem [View article]
Institutions buy and sell stock in aggregate (all of the companies in their portfolio) to maintain their relative percentages in any given company. Also, there are sector funds, ETFs, et al that trade many or all stocks in aggregate, not individual stocks. Apple is the most widely held stock by hedge funds and a very liquid stock w/ thin spreads, so it's easy to short in soft periods. Mutual funds are restricted as to the % that they can hold of any 1 stock, so accumulation of AAPL becomes difficult once they've maxed out % wise. There are many Apple shareholders who bought in at much lower prices years ago. They're far more likely to sell their shares at big profits than to continue to buy at relatively higher prices. Steve Jobs retired then passed away. Apple missed an analyst projection based upon the timing of the release of the 4S. The overall stock market is in a bearish trend. Any other questions?
Apple: The Most Undervalued Large-Cap Stock In America [View article]
Apple: The Most Undervalued Large-Cap Stock In America [View article]
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So Apple is a victim of its size and liquidity. Reduce Apple's size by 50% or so w/ a proportionate reduction in its EPS, et al and the stock would be growing much more robustly.
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