Dialectical Materialist

Dialectical Materialist
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  • Apple: Why An Inferior iPhone Made Sense For 2015  [View article]
    RO I thought you were dumping your shares? As is your right of course. I just can't tell where you are with this stock. Except frustrated, I know that. And I get that too. AAPL can be frustrating to own. I have owned it for a long time and seen many stalls and dips. But in the end companty performance rules the day. My timeframe may be different from yours. Which is why you are right to assess whether this stock belongs in your portfolio and with what weighting.

    I am not concerned about AAPL. It is a solid company with a rock solid balance sheet. There is no such thing as zero risk in the market, but a well run company with a ton of cash is about as close as you can get. Sure there are other stocks that have out performed AAPL this past year. And if I was planning on selling right now, that might concern me. But I'm not.

    I do some trading of some stocks, AAPL included, so price action is important in that regard, but in terms of an "investment" all I want is good long term gain with limited downside. I think AAPL provides that.

    The dividend and the price will average up over time. I'm okay with that. As to how much the buybacks have added to the price of the stock, I guess the question would be just how low you think the PE of AAPL can get. Buybacks expand EPS, they don't do anything to directly support the price except insofar as the stock is priced in relation to earnings.

    Lastly, I should say that the market for the last several years has been fueled by crazy low interest rates. It is fertile ground for malinvestment. It reduces the inherent risk in pouring money into companies with little or no earnings (because borrowing to fuel growth is so cheap). Eventually the laws of the universe will be restored and earnings will matter. And the cost of servicing debt will rise. In the words of Buffett, when the tide goes out we see who has been swimming naked. As interest rates inevitably rise from these historically unprecedented low levels, the tide will indeed roll out. Big money will rush to buy back in to companies that actually make a profit. There may be a general shock to the markets that dings all stocks, but the strong ones will rebound quickly.

    Thanks for reading. Good luck to you.
    Dec 2, 2015. 12:08 AM | 1 Like Like |Link to Comment
  • Why Netflix Is One Of My Top Picks For 2016  [View article]
    scott trader, I love Netflix the company and loved my NFLX shares and the money they made for me several years ago. Did I sell too soon? You bet. I bought back in during the summer (after several failed attempts to turn a profit shorting it) but went short again before the August stock market swoon. What I lost in AAPL on paper was partially offset by booked profits in my NFLX shorts. But I'd still rather have the shares I sold many years ago!

    I enjoy watching stories like NFLX unfold. I don't always have to be right about how the story ends. Which is good, because I'm not. But we are in Act Two of this play. Act Three is coming in late 2016 and into 2017. It will have me on the edge of my seat. They either will start to wind down their cash burn having achieved their growth targets or they won't. If they do, the profit engine will start to kick in and earnings will grow substantially. If they don't, it gets even more interesting. Who doesn't love a good thriller?
    Dec 1, 2015. 08:35 PM | Likes Like |Link to Comment
  • Apple: Why An Inferior iPhone Made Sense For 2015  [View article]
    SEC you started to convince me. I was thinking if TC had the chance to buy NFLX for tennis on the dollar he probably should have. I wasn't sure what that was, but it sounds really cheap.
    Dec 1, 2015. 08:15 PM | 2 Likes Like |Link to Comment
  • Apple: Why An Inferior iPhone Made Sense For 2015  [View article]
    RO says: As we speak their Average Repurchased shares are at $119 and the stock price is barely holding $118.

    "In 2015, Apple repurchased shares at a $118 average stock price, 25% higher than the average price paid in 2014. When looking back at 2013, Apple was buying shares at price levels that were 65% lower than the current stock price."


    We may very well look back in a couple years or so and see that the 118 or 119 a share they spent in 2015 was as genius a move as buying back shares in 2013 for 42 a share.

    In MSFT's lost decade, share buybacks were offsetting the impact of massive PE compression from very lofty levels. AAPL has no such lofty PE to compress. In this case, the observation that the share price has been stagnant is more a case for continuing the buybacks than an argument against it.
    Dec 1, 2015. 08:06 PM | 1 Like Like |Link to Comment
  • Apple's High Margins Are Out Of Sync With Reality  [View article]
    vintage, I know. It is quite a shock to be told you can't possibly be enjoying your purchase as much as you thought you were. Better sell it on eBay while there's still time.
    Dec 1, 2015. 07:44 PM | 1 Like Like |Link to Comment
  • Apple's High Margins Are Out Of Sync With Reality  [View article]
    "There is a risk that people will discover the truth."

    This kind of comment is exactly what I was describing above but I had not yet read. What is this "Truth" that people will discover? That Apple products are not as pleasing as they think they are? Because you don't think they are?

    This idea that Apple customers are being fooled into paying for something that is not really "worth it" is fundamentally flawed. It reflects a misunderstanding of the experience Apple customers enjoy.

    Insisting that they could have the same level of enjoyment from another product is like trying to convince someone they should not be eating what they ordered off the menu because something else on the menu is cheaper and is "just as good". People want what they want and will pay what they feel like paying for it. No amount of coaching them to comparison shop for an equivalent experience at a lower cost will convince them because price is not a major factor in their purchasing decision.
    Dec 1, 2015. 07:29 PM | 3 Likes Like |Link to Comment
  • Apple's High Margins Are Out Of Sync With Reality  [View article]

    I suspect you may be right for some small minority of folks. But the same argument has been used against me when I express my bearish view of AMZN or NFLX. And from my perspective it is not my jealousy of the huge returns these investors have seen that informs my opinion, so I wonder if for many people the motivation for Apple negativity may be different.

    Here I suspect it is in how the argument is framed. For example, with NFLX -- I won't bother trying to make a convincing bear case here, I only want to use it as an example -- my view is that forward profitability assumptions are too aggressive. I agree with many NFLX bulls about how great the company is, but I just can't wrap my mind around how they will both grow so big and improve margins so much that the present valuation will prove justified. It is just not the way I see the stock world. I am mystified. And while I spend my time being mystified, many NFLX investors have spent their time growing richer.

    So when it comes to Apple I think many people simply have a fundamental impression (I would say a flawed one) about what the company is, what it does, why people buy their products, and how long this may continue into the future. If I believed that Apple was selling the equivalent of tap water, marked up for the Apple label, as many bears seem to believe, I might expect the consumer would "grow wise" and that Apple's sales may shrink drastically in the near future.

    The author takes an interesting tack when he frames an anti-Apple argument in terms of the consumer's price sensitivity. He seems not to accept that price sensitivity is not a prominent feature among most of Apple's customers. But once you frame the argument a certain (flawed) way, you get a seemingly logical (and similarly flawed) conclusion.

    I think most Apple negativity can be traced to fundamental misconceptions about the company. For that I have sometimes been accused of being a member of the cult. Which of course belies the preconception that Apple's success is based duping consumers. Which is wrong, but you'll never convince "them" of that.
    Dec 1, 2015. 07:12 PM | 3 Likes Like |Link to Comment
  • Apple's High Margins Are Out Of Sync With Reality  [View article]
    "There's a reason why many people want Tim Cook out."

    Let's put it to a vote. I doubt most shareholders are upset with the way Tim Cook (Jobs's hand picked successor) has run the company. Cook has been a phenomenal CEO at a very important time for Apple. The company Jobs ran was practically a corner store compared to its size today. Jobs marveled over $15B in annual revenue. Now they are making well over ten times that, and they'll make more than $15B in profit in just the next quarter. That's not the mark of a CEO who is failing.

    The author is reaching so hard to make this argument I'm afraid he might pull something.
    Dec 1, 2015. 10:09 AM | 1 Like Like |Link to Comment
  • Why Netflix Is One Of My Top Picks For 2016  [View article]
    Sakelaris, I agree about the value of the DVD rental, as I think I have said in the past. But I can't help but think that DVD's themselves will eventually go the way of VHS tapes. I think the future of DVD rental is in jeopardy because DVD's are in jeopardy. Not this year or the next, but surely soon. There is a real value proposition right now, but obsolescence is practically guaranteed.
    Dec 1, 2015. 09:56 AM | Likes Like |Link to Comment
  • Next Quarter Could Be A Back-Breaking Event For Apple Shareholders  [View article]
    Precisely why Apple is changing to the Apple-product naming scheme. No fuss no muss. No trademark issues, no generic brand trademark loss (where we call everything Kleenex or Band-aid or, as has been common iPod or iPad). Calling something an Apple Pencil of Apple watch solves all kinds of problems and is still brand positive. That is why you will see Apple use this strategy for the foreseeable future.
    Nov 28, 2015. 06:24 PM | 1 Like Like |Link to Comment
  • Apple: Foxconn Data Is Not A False Positive  [View article]
    From Fisku's own website,

    "While the data is worldwide, the majority of Fiksu's clients focus on user acquisition in the US and Europe, so the Asia Pacific region may be underrepresented."

    Now ask yourself if undercounting Asia might make the iPhone 6s launch appear weaker than it is.
    Nov 28, 2015. 01:01 PM | 4 Likes Like |Link to Comment
  • Apple buys Star Wars motion capture tech developer Faceshift  [View news story]
    The software is not free. It is counted as deferred revenue on the books, so Apple is selling it. It's just that the purchase price is included in the hardware. But I agree with the characterization of Apple as a hardware company. It was Jobs who claimed Apple is really a software company. I never quite understood that. And let's face it, if it's true, we're all in trouble because some of their recent software has been just awful. I am as fanboy as they come, but iTunes is a mess and they have had buggier OS launches recently than in the past. If Apple is a software company, they'd better mind their knitting.

    And fix iCloud, please.

    Lastly, I should add that Jobs had a better handle on Apple than I ever will, so if he says it's a software company, who am I to argue. I just never understood the characterization is all.
    Nov 25, 2015. 05:40 PM | Likes Like |Link to Comment
  • Next Quarter Could Be A Back-Breaking Event For Apple Shareholders  [View article]
    I enjoy the opportunity to agree with Cincinnatus for a change. There are many folks who have been bearish on Apple for quite some time and for a collection of more specific reasons. If Apple does head south, the Author will not be counted as one of the early canaries in this coal mine.
    Nov 25, 2015. 05:28 PM | 5 Likes Like |Link to Comment
  • Next Quarter Could Be A Back-Breaking Event For Apple Shareholders  [View article]
    Zhang Fei, not quite right. Apple has dropped the i-product naming scheme. Note the Apple Watch, the Apple Pencil, and the Apple TV. Using Apple as the identifier keeps their brand position strong, and they have the luxury of using any noun they want as the product name. You can't trademark common words like watch or pencil or TV, but no one else can make an "Apple" one of these. It is a lot simpler from the trademark standpoint and a lot less silly when you get down to it to merely use the company name with the product. There would not have been an iwatch even if the name were available.
    Nov 25, 2015. 05:26 PM | 4 Likes Like |Link to Comment
  • Next Quarter Could Be A Back-Breaking Event For Apple Shareholders  [View article]
    rope, I agree. Well stated.
    Nov 25, 2015. 12:49 AM | Likes Like |Link to Comment