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Dialectical Materialist

Dialectical Materialist
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  • Tim Cook, We Need More Share Buybacks [View article]
    rnsmith, you're right of course. I was referring to a more substantial increase than they have done so far. Lots of folks, as evidenced by comments here and elsewhere, think Apple is being pretty stingy.
    Nov 21, 2015. 08:27 PM | 1 Like Like |Link to Comment
  • Tim Cook, We Need More Share Buybacks [View article]
    I have a suspicion that dividend increases are on the way. I suspect one more year of modest increase and then some more significant boosts, all on the schedule of April announcements that they have been maintaining.

    Their chief problem is that while they have enormous cash flow, so much of it being overseas is hindering their capital return. When they ratchet down they buy backs, they'll have plenty of domestic cash to support substantial dividends.

    One thing I know for sure, even if I could be mistaken about Apple's strategy, is that they do have a strategy. They have no doubt given a great deal of thought to what they'll do with their cash. They have a plan. And since they have brought in a new CFO and a board member with substantial fund management experience (one of the founding members of Blackrock) over the past couple years or so, I have complete confidence that they'll manage this "problem" of having too much money piling up.
    Nov 21, 2015. 06:55 PM | Likes Like |Link to Comment
  • Tim Cook, We Need More Share Buybacks [View article]
    If you don't believe that reducing the float creates value for the shareholder, then logic dictates increasing the float wouldn't destroy shareholder value. Do you really think if Apple had issued a billion new shares instead of retiring a billion old ones, the stock price would be the same? Of course not. But it should be if one accepts the notion that reducing the float is shareholder neutral (i.e. creates no value).
    Nov 21, 2015. 04:29 PM | 1 Like Like |Link to Comment
  • Tim Cook, We Need More Share Buybacks [View article]
    Wow, you don't think so? Why not?

    Do you think revenue will actually be lower or do you think margins will suffer?

    I think there is a great deal of room for revenue growth. The Apple Watch alone is going to be huge this holiday season. I'll bet Apple sells 15 million watches at least in 2016. That's about $7.5B in revenue. That can help mitigate a lot of "tough comparisons".

    Then there's Apple TV, Apple Music, App store growth... There are a lot of comparatively small contributors that add up over time. I think Apple can top 2015's revenue.
    Nov 20, 2015. 07:01 PM | 4 Likes Like |Link to Comment
  • Tim Cook, We Need More Share Buybacks [View article]
    MSFT has 8 billion shares and its traction seems just fine. I don't understand why the number of outstanding shares would have any relation to valuation. It doesn't.
    Nov 20, 2015. 05:59 PM | 1 Like Like |Link to Comment
  • Tim Cook, We Need More Share Buybacks [View article]
    Couldn't you frame the risk of accelerated repurchases in terms of the likelihood that the stock may pop? If shares are substantially undervalued but may climb suddenly as good news is priced into the stock, being on the hook for this increase would be less than ideal. So sure you could argue at some price it is undervalued enough for management to throw caution to the wind, but couldn't it also be seen as a barometer of management's assessment of the risk of sudden share price appreciation? I would want to be accumulating on the open market at cost if I thought I might be on the hook for a bulk purchase that climbs 20% in the next 60 days.

    I think the decision to use accelerated share repurchases is probably a complicated one and not subject to a single explanation.
    Nov 20, 2015. 05:42 PM | 1 Like Like |Link to Comment
  • 2016 Will Be Apple's Biggest Year [View article]
    And look out for q1 2017. It will be another 14 week quarter. That means an extra 25 cents in EPS just because the reporting period is longer. You could say. "Yeah but the reporting period is longer, so that doesn't mean anything." But that will not be the way the market treats the news. It's like with home runs... No one cares about at bats they just focus on the number of home runs. In just over a year, that extra week will mean an additional $4billion in revenue, $1billion+ in earnings, and about 0.25 EPS.

    This will set up the mother of all compares for the following year, but initially the numbers are bound to stun many traders, exactly as happened the last time they had a 14 week quarter.
    Nov 17, 2015. 03:10 PM | 1 Like Like |Link to Comment
  • 2016 Won't Be Apple's Biggest Year [View article]
    Alex, you could be right. I got all my college calculus credits while I was still in high school many many years ago. But "decelerating sales" is a poor expression for "slowing growth". It is still growth. And just as in my example, no one would reasonably breathe a sigh of relief that a train that was once moving 120 miles an hour but is now moving 132 miles an hour is "slowing." It's not slowing at all. It's still moving faster. And similarly AAPL's iPhone sales are set to grow in 2016.

    If you made $100k a year and got a $20k raise each year, are you going to complain that over time this raise amounts to "slowing growth"? Because it is, of course. The $20k raise when you're making $200k is only 10% whereas it was a full 20% of the original $100k. But it is still $20k above and beyond the previous year.

    All of these dangerous sounding phrases like "slowing sales" make it sound like we're talking about an actual decline when nothing could be further from the truth. And if you fall for your own voodoo, you start to think that only growing 5% on revenues of $230 billion is somehow a sign of decline.

    There's cute statistical jargon and then there is reality. Don't confuse the two is my point.
    Nov 14, 2015. 06:13 PM | 7 Likes Like |Link to Comment
  • 2016 Won't Be Apple's Biggest Year [View article]
    Here's a fun thought piece.

    You're on a train without breaks barreling down a hill headed straight for the side of a mountain. You watch the speed climb from 40 miles per hour to 80 mph (100% growth), then it goes from 80 mph to 120 mph (50% growth), finally it goes from 120 mph to 132 mph (10% growth).

    And all the Apple bears on the train start celebrating. "Don't worry," they say "the train is slowing down." And no one has the heart to explain to them that slowing growth does not mean the train is slowing. It is just accelerating less quickly.

    When the author says, "Its iPhone growth fell below the market's high expectations, as growth decelerated from 133% year over year to 28% year over year revenue between Q1 FY 2013 and Q1 FY 2012. Meaningful deceleration in sales is enough to stifle investor optimism." He is making the same mistake. Slowing growth is not a "deceleration in sales".

    Sometimes it takes a clear example from the world of physics to make the point. And sometimes people still won't get it.
    Nov 14, 2015. 12:30 PM | 6 Likes Like |Link to Comment
  • Was Apple's Guidance Really That Weak? [View article]
    "so they can sit tight and giggle in your back."

    Maybe but in the meantime I am chuckling the way over the credit union.
    Nov 10, 2015. 01:34 AM | 2 Likes Like |Link to Comment
  • Was Apple's Guidance Really That Weak? [View article]
    "Your statements there are logically inconsistent."

    No, not at all.

    I can say, "I bet it will be cold this winter." And you can say, "Okay smart guy, why not tell me what the temperature will be on January 16th?"

    And I would say, "I don't know what the temperature will be on January 16th, but I believe this winter will be colder than this summer."

    And you could say, "Your statements are logically inconsistent. You can't tell me it will be cold without giving me exact temperatures."

    Do you see? I really hope you do.

    I can feel confident that Apple will post good numbers this year without having to do a bunch of show boating and pretending that I can accurately predict what those numbers will be. And one reason I don't think anyone can model these numbers successfully on a consistent basis is, as I have already said, Apple has a lot of influence over the final numbers. These are not things that can be precisely predicted, because Apple's management can move them a lot in either direction by the choices they make.

    So, no, it is not logically inconsistent in the least to expect good numbers and not be willing to pretend I will know exactly what they are.

    Also, I can "expect" something and still accept that I could be wrong. So when I say I expect very good numbers from Apple, at the same time I understand that these numbers may possibly not be very good. I have an open mind.
    Nov 4, 2015. 06:57 PM | 3 Likes Like |Link to Comment
  • Was Apple's Guidance Really That Weak? [View article]
    Vlad, it will be interesting to see how this plays out. iPhone growth is not infinite. Apple knows this. Growth will abate at some point. If not this year, maybe next or the year after that.

    Apple's not stupid. They know they need to increase revenue. So far they have taken steps which have resulted in very positive outcomes. They have a huge footprint in the market and can explore many paths to growth.

    They can expand in enterprise, which is why they have been aggressively pursuing this notion.

    They can make a dent in India, which is why they have been making partnerships to increase sales in that populous nation.

    They can make new products and offer new services (the Apple Watch, the iPad Pro, the Apple TV, Apple Music)

    They can attempt to expand into growing segments (HomeKit, Carplay, HealthKit)

    They can offer new ecosystem tweaks (Apple Pay, 3dTouch)

    They can offer new programing tools (Metal API, Swift)

    They can deploy their cash in an attempt to leverage it specifically for the benefit of the stock (divi's and buybacks) or for the company (buying small companies).

    There is no guarantee that any of these will work. None. Apple could fail on each and every one of these implementations, or on so few that they fail to move the needle. That is a non-zero probability outcome. It could happen.

    But my opinion is that this huge company can still find ways to grow. Then if all else fails, they can go big and buy some very large company. But I think this would be a sign that they have reached the end of the organic growth cycle. So far, they remain a very good bet for growth in 2016 and 2017. IMHO of course.
    Nov 3, 2015. 10:02 PM | 3 Likes Like |Link to Comment
  • Was Apple's Guidance Really That Weak? [View article]
    Lots of really smart people can't consistently nail Apple's numbers, so I don't think predicting them has a lot of value.

    Having said that, Your numbers are:
    FQ1: Rev $77.5 billion iPhone units 76 million
    FQ2: Rev $58 billion (flat YoY) iPhone units 59 million

    Not bad guesses. I think fq1 will be closer to $80b and fq2 could be impacted by a new smaller iPhone. Beyond that, who knows. I only know that Apple is a hugely profitable company with a lot of levers it can pull to manage earnings. Guessing what Apple reports is in some sense guessing what Apple wants to report. They can adjust capex, deferrals, or stuff the channel if they need to make a certain number. Given Tim Cook's conservative nature, I actually suspect they are keeping their numbers at the lowest possible blow out range in order to keep something in the chamber for when they need it.

    This company is poised for monster years in 2016 and 2017. Folks can wring their hands and worry all they want. Apple is a battleship running full steam ahead.
    Nov 3, 2015. 06:30 PM | 5 Likes Like |Link to Comment
  • Was Apple's Guidance Really That Weak? [View article]
    "DM, you've finally gotten something right."

    You don't know how happy this makes me. To have been struggling with my analysis of AAPL over the years has been a real burden on my family. The strains of planning early retirement should not be underestimated.

    For the last ten years the market has priced AAPL as if it would grow more slowly than it later proved to do. This is nothing new. And even when Apple's growth does slow down (no company can grow net income at 38% forever) there will be a lot of slack yet to be absorbed by the market's break even valuation of Apple's future. I am not worried about their growth.

    Let's revisit this discussion after q1 results and I may perhaps be able to explain what I mean. I don't care if you get it or not. That has no impact on how I will be spending my days when I retire on my AAPL powered portfolio.

    Too bad so many in "the market" have been dragged kicking and screaming toward Apple's $650B market cap. For some of us, it has been an obvious outcome, just as the eventual $1T valuation is. If you want to tell me while your standing at the station that my train isn't moving, that's fine with me. I'll send you a postcard.
    Nov 3, 2015. 11:44 AM | 2 Likes Like |Link to Comment
  • Was Apple's Guidance Really That Weak? [View article]
    It's 1 to 4 % guidance above what they achieved last year, but it is 18% higher than last year's guidance (which they beat by 14%) so that tells you something.

    What kind of guidance would not have been "weak" and would that count if they didn't beat that by 14% too? In other words, if they guide to around 76b and they beat it by 6%, they are up over $80b which is a 8% growth YoY. Is that really "weak"? Or are people taking guidance as the actual number they'll hit. That would be silly, since they have beat it by an average of double digits.

    The market does not price in where a company is headed, it prices in wear it THINKS a company is headed. And anyone who thinks AAPL's guidance suggests weak results is not paying attention.

    Revenue declines in q2? Anything is possible, but with the Chinese New Year and all the new 4g customers online and Apple's expanding pipeline of products, I wouldn't be too sure.

    Even iPad comps are about to get a whole lot easier. There's still some pretty good news ahead for Apple. I don't need to spin it, it's what I believe. I have my concerns about the company's future, but none of them have to do with whether they'll sell more iPhone 6s's than iPhone 6's.

    Nov 2, 2015. 06:42 PM | 4 Likes Like |Link to Comment