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Dialectical Materialist

Dialectical Materialist
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  • Apple: Fiscal 2015 Was OK, But Fiscal 2016 Shaping Up To Be A Better Year [View article]
    "5 years ago Apple traded at just 2x book value"

    I didn't remember this happening, so I went to yCharts to see. It shows AAPL's Price to book 5 years ago was 5.5 - very close to where it is today. I am not sure where you are getting your numbers.

    During the 50% haircut, when AAPL traded at its recent lows in 2013, it traded just below 3x book.

    I can't really debate unless there is agreement about things as fundamental as these simple ratios. So maybe you could explain how or why you think Apple traded at 2x book 5 years ago.
    Jul 27, 2015. 11:25 AM | 4 Likes Like |Link to Comment
  • Netflix And Pricing Power [View article]
    "But maybe you guys think companies should use guesses and gut feel to set prices instead."

    Do your surveys also include straw men? Because it's important to find out what they think, too.
    Jul 27, 2015. 10:47 AM | Likes Like |Link to Comment
  • Apple: Fiscal 2015 Was OK, But Fiscal 2016 Shaping Up To Be A Better Year [View article]
    "Apple is like the roach motel of phone makers. Customers come in, but they don't come out."

    I picture Don Draper at his desk, slightly annoyed, asking Peggy Olson, "What else you got?"
    Jul 26, 2015. 10:50 PM | Likes Like |Link to Comment
  • Netflix And Pricing Power [View article]
    You probably mean "when [U.S.] consumers' willingness to pay is tested," right? Or do the most accurate and trustworthy methods available suggest the same pricing power for international customers as well?

    Oddly the report includes no data about the sample size or even what geographical market is being described.

    And just as interesting: if "a minor price increase" was not to blame for missing subscription targets, that would mean something else was.
    Jul 26, 2015. 07:29 PM | 2 Likes Like |Link to Comment
  • Buying Apple: Consider The Scale Of The Potential Investment [View article]
    “Keep all your eggs in one basket, but watch that basket closely.”

    Here he is paraphrasing Carnegie:
    Keep all your eggs in one basket and watch that basket!

    But as it turns out, Carnegie was actually quoting Mark Twain's Pudd'nhead Wilson. (Published in 1894)
    Jul 26, 2015. 03:46 PM | Likes Like |Link to Comment
  • Apple: Fiscal 2015 Was OK, But Fiscal 2016 Shaping Up To Be A Better Year [View article]

    Great points. And I agree with much of what you are saying.

    Regarding AAPL, yes it is true that if not for buybacks they would be trading at PE 16.5 rather than 14.5 using today's price. But they'd also have zero debt and about $40B more in their war chest, so they might warrant that higher PE in that case. In other words, backing out cash net of debt in both cases would get you to about the same PE.

    INTC would not be a better investment if it took on net debt to reduce float. Except maybe insofar as they save money on dividends and right off the cost of the interest payments. But they wouldn't necessarily be a worse investment either.

    PE is just one number and it doesn't tell the whole story, I certainly agree with that.

    If you are of the opinion, as I am, that at least a correction and possibly something much worse is coming for the US stock market, you do have some difficult questions to ask. Is it worth putting any new money in this market? Should a move to greater portion of cash be made? It's tough to time the markets, but it is also insane to think they will go upward with no pauses or declines along the way.

    I think stocks in general are overvalued today. But that is all the more reason to look for quality stocks like AAPL with huge cash reserves, modest valuations (relative to their peers) and quality earnings.

    The story of why AAPL revenue became stagnant is actually an interesting one. If you assumed 2012 was closer to the $48B it should have been based on its growth trajectory, then you'd see 48, 50, 53. It is only because 2012 was just off the hook that growth appeared to stall so badly. So it is hard to punish a company for having had one insanely high year of revenue. The story would have been better if they had actually missed out on $8b in revenue in 2012, which is kind of twisted when you think about it.
    Jul 26, 2015. 01:08 PM | 2 Likes Like |Link to Comment
  • Apple: Fiscal 2015 Was OK, But Fiscal 2016 Shaping Up To Be A Better Year [View article]
    LOL, and you have a bunch of people claiming that eating at home is cheaper and basically the same experience, and anyway it is more popular so it must be better. Plus it's more customizable, don't you know.
    Jul 25, 2015. 11:38 PM | 3 Likes Like |Link to Comment
  • Buying Apple: Consider The Scale Of The Potential Investment [View article]
    "What happens to this business model when interest rates finally rise I do not know."

    I can tell you what happens when interest rates rise: Their debt will cost more.

    But you know what else? The nearly $200B cash pile they have will start to yield some startling amounts of cash. With a 3% return, it would generate over a dollar a share in earnings that drops right to the bottom line. In a very high interest rate environment it would not be unusual to see a 5% yield. That would be $10B in additional earnings every year (and the cash pile is only growing larger).

    Apple would love to see this era of free money end. They don't need free money and they could use a decent yield on their savings.

    Now other companies out there, you know the ones that have negative free cash flow and are valued on aggressive growth models. Those are the companies that would not survive a 5% interest rate environment.
    Jul 25, 2015. 08:51 PM | 3 Likes Like |Link to Comment
  • Apple: Fiscal 2015 Was OK, But Fiscal 2016 Shaping Up To Be A Better Year [View article]
    Ricardo, have you considered that term "ecosystem" may not actually be a sexy advertising word? You say you would trumpet it if it were your company, but Apple is very good with their product messaging. So good in fact that many critics exclaim that Apple's success is entirely due to its marketing. So it seems odd to want to explicitly put a kludgy term like ecosystem into Apple's messaging.

    But if you are looking for the impact of the ecosystem, it is obvious and pervasive. A good chef does not explain that he wanted all the dishes he serves to work well together. If he has done his job, he doesn't have to. The diner experiences the cohesion across the meal in a delightful and surprising way.

    So Apple uses words like incredible and magical to basically describe the same kinds of experience that could be included in the concept of "ecosystem".

    The watch works with the iPhone. Surely the customer knows this without Apple lecturing him on "ecosystem". And if another customer buys other products besides the iPhone, she may discover the facets of the ecosystem that work for her. And there are many. The devices are designed and continually improved with an eye toward the cohesive whole. Apple need not confuse their marketing message with this concept. Its discovery is simply part of the delight of using the product, like tasting a dessert that perfectly complements a meal.
    Jul 25, 2015. 07:19 PM | 3 Likes Like |Link to Comment
  • Apple: Fiscal 2015 Was OK, But Fiscal 2016 Shaping Up To Be A Better Year [View article]
    In 2011 Apple sold 72.31 million iPhones. They sold more than that in q1 of this year. The reason the iPhone plays such a big role in the company is that sales have exploded. And that is somehow a bad thing? You'd have a point if iPhone sales were still around 75 million and Apple had done nothing new.
    Jul 25, 2015. 09:36 AM | 5 Likes Like |Link to Comment
  • Apple: Fiscal 2015 Was OK, But Fiscal 2016 Shaping Up To Be A Better Year [View article]
    Martin, do you realize AAPL books US taxes for most of their overseas earnings? These are taxes that are expensed but not paid yet (and will not be paid unless and until the money is repatriated).

    If Tim Cook wanted to goose short term numbers, Apple could simply decide not to book these taxes (like eBay).

    Apple uses GAAP accounting and are very conservative in their bookkeeping. This is not what companies do if they are looking for short term gains only.
    Jul 25, 2015. 09:25 AM | 11 Likes Like |Link to Comment
  • Apple: Fiscal 2015 Was OK, But Fiscal 2016 Shaping Up To Be A Better Year [View article]

    Price/Book is not a great metric for software companies and fabless hardware companies (design companies) because so much of their value is intangible property. Apple is not a sawmill.

    And Price/Sales can be a useful metric, but net operating margin matters a great deal. If it is a company like Walmart that only gets to keep a tiny portion of all sales, a P/S of .48 may be appropriate. But since AAPL's margin is higher than the S&P, you'd expect its P/S to be higher as well. And even then it's just over 3. Not exactly nosebleed territory.

    For comparison, MSFT has a P/S of 3.96, GOOGL has a 6.64, CRM has an 8.37, NFLX is 7.67.

    If AAPL is overvalued, look out for the rest of the tech sector.
    Jul 25, 2015. 09:17 AM | 8 Likes Like |Link to Comment
  • Apple: The Stark Contrast Between iPad And Surface Sales [View article]
    Consider that the Apple Watch is outselling the Surface. That puts into stark relief the claims about how one product is a flop while the other is such a success.

    It seems to me that a million or more units of something in a quarter is a pretty successful product. Way to go Microsoft. The Surface has found a place in the world. But again, 10 million iPads selling is supposed to be a sign of the apocalypse. The double standards that apply here are obvious.
    Jul 24, 2015. 10:24 AM | 2 Likes Like |Link to Comment
  • Why Apple Will Escape The $130 Resistance Level [View article]
    Couldn't we test this? Wasn't it in January 2014 that the stock went down 8% after an iPhone "miss"? The stock dropped on Tuesday January 28th the day after earnings and didn't start to recover until the following Monday.

    And later we found out that Tim Cook had gotten aggressive with the buyback in response to the price action:

    So it seems to me the buyback didn't start to take effect until at least 5 business days and possibly 6. All that is clear is that the week following earnings the stock climbed. In the next two weeks it almost completely recovered and later we learned Apple was buying big time during that window.

    So in short, it does look like it took several days last time the stock was irrationally beat down on an iPhone "miss".

    Of course, there's no telling if Apple will be aggressive with its buyback as soon as it can (but it seems a logical possibility).
    Jul 23, 2015. 09:03 PM | Likes Like |Link to Comment
  • Apple: 5 Is The Magic Number [View article]
    SA really needs an "ignore" function. I know some people would choose to ignore me, which is just fine. But it would be really great if users could focus on the commenters they thought were most worth their time.

    I'm sure some people would choose to follow beefy136's daily angst. And others would not. Either way, everyone wins... Except Seeking Alpha, of course, which would lose the page views from new comments posted by ignored commenters. It is an exercise for the reader to decide whether the lost page views have anything to do with SA not implementing this much requested feature.
    Jul 23, 2015. 03:04 AM | 2 Likes Like |Link to Comment