Apple stock closes at new high of $136.70 as market cap inches toward $720 billion

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  • Reply 21 of 27
    By the way, the stock just smashed through $137.
  • Reply 22 of 27
    sog35 said:
    By the way, the stock just smashed through $137.
    Yes it did. me happy.

    Thanks Tim Cook.
    Thanks, Trump! (Hey, it works both ways)
  • Reply 23 of 27
    sog35 said:
    sog35 said:
    By the way, the stock just smashed through $137.
    Yes it did. me happy.

    Thanks Tim Cook.
    Thanks, Trump! (Hey, it works both ways)
    Trumps tax plan is one of the big reasons the entire market has been up since he won.

    I don't want to get political but Trump has been great for the stock market so far.
    I wish they aggressively moved forward on a tax plan. If they enacted the FairTax and shut down the IRS, this would be great for the US.
  • Reply 24 of 27
    sog35 said:
    sog35 said:
    sog35 said:
    By the way, the stock just smashed through $137.
    Yes it did. me happy.

    Thanks Tim Cook.
    Thanks, Trump! (Hey, it works both ways)
    Trumps tax plan is one of the big reasons the entire market has been up since he won.

    I don't want to get political but Trump has been great for the stock market so far.
    I wish they aggressively moved forward on a tax plan. If they enacted the FairTax and shut down the IRS, this would be great for the US.
    I've read a bit on the FairTAx

    So 23% tax on all purchases except essentials?

    Problem is people with low income will get the shaft. Most don't pay any taxes besides payroll tax of 7.65%.  Those with children actually get money back. I guess you could argue they would have zero tax if they only bought essentials.

    I'll be honest. I do enjoy paying only 15% tax on long term capital gains and dividends.


    FairTax would amount to no more income tax! No more write offs. Mainly a consumption tax, with a prebate for the poorest Americans. I know it's not perfect. In a perfect world, the Federal government would be "small enough to drown it in a bathtub", there would be far fewer taxes and regulations and people would be more responsible for their own family first and themselves and social programs wouldn't be funded via tax theft, all strictly voluntary.
  • Reply 25 of 27
    radarthekatradarthekat Posts: 3,842moderator
    sog35 said:
    sog35 said:
    sog35 said:
    sog35 said:
    sog35 said:
    What is rarely mentioned in the buyback discussions is that having a lot of cash on the books implies that a significant portion of each newly invested dollar in the stock goes to buy non-performing cash rather than a portion of the productively operating business.  This is especially a problem when the cash is actually valued at its face value.  Arguably, Apple's pile of cash/cash equivalents has been valued at almost nothing at times in the past, and it's because cash doesn't yield any sort of decent return to investors that's the reason why.  And so with the cash valued at less than face value, the overall company's enterprise value is depressed and this is what we talk about when we say, Apple, ex-cash, is trading at a ridiculously low multiple.  

    But now we're in a period where two things have changed, both, at the moment, only perceptions.  First, the political climate suggests that Apple might be able to repatriate its vast hoard of overseas cash, and that means that cash could be either put to productive use to expand the business in some manner, or it could be shed from the balance sheet through dividends and buybacks.  Either way, removing the cash from the balance sheet increases the percentage of each newly invested dollar that goes to buy a piece of the productive operating business rather than dead cash, and so investors, anticipating this, are more attracted to Apple as an investment.  Second, Tim Cook has reinforced the above perception by recently acknowledging that Apple is open to acquisitions of any size.  Both of these factors, along with the iPhone X speculation and the company's recent firing-on-all-cylinders performance, has the stock moving unhindered toward fair value.  Until something among these factors changes, I won't be joining Sog35 or anyone else in selling shares.  

    And watch out above if a favorable tax repatriation plan comes to fruition.  The stock will react immediately and sharply.  
    I agree holding Apple shares is a good idea.  I still hold a significant amount of Apple shares (for the size of my portfolio)

    I sold 70% of my shares because I was SEVERLY OVERWEIGHT on Apple. 50% of my portfolio was Apple. Now its about 15%.
    If your portfolio is mostly AAPL, it's not overweight, it's outperforming the market and competitors in their sector. Just buy low and "hold forever", like Buffet said once. I'll never understand day trader mentality.
    Its not safe or wise to have 50% of your portfolio in one stock. Risk is way too high. This is how many people have lost a fortune. Hello Enron.

    Apple is only about 5% of Warren Buffets holdings. Kraft Heinz is Berkshire’s largest holding at 19% of its total stock investments with Wells Fargo a close second at 18%. Coca-Cola comes in third at 11% and the firm's other tech investment, IBM, is fourth at 9%.

    And I'm not a trader. I've had Apple stock since Nov 2012
    Speaking just for myself, I bought AAPL since before Jobs returned, kept buying and have never sold a single share. It makes up the majority of my holdings because it's gained so much more than all of the other stocks I've held and continue to hold. Big "scary" dips are not a concern for me anymore. You'd never guess what several of my other best performing stocks have been... a company that makes high-fructose corn syrup and the world's biggest manufacturer of cigarettes. Invest in the companies that perform well consistently and you'll do well over time.
    The thing is your success in Apple does not mean its a good strategy. Especially not today. Buying Apple at $1 in 1997 is very different from buying them at $136 today

    Apple was a massive anomaly. It has gone up 13000% since 2002.  The exception proves the rule. For every Apple there are dozens of Enron's, Sears, Kodak, GM, ect.  You are playing with fire if 50% or more of your portfolio is in one stock. 

    Again for 99.99% of situations it is not wise to invest 50% of your investments in a single stock.  Just because someone sold their house to buy lottery tickets and won $30 million does not mean everyone should. 
    Do not misunderstand. My circumstances are unique to me. I don't give out stock advice to others. Giving out stock advice to others is a game of chance and stupidity.
    I'll give out stock advice... haha. I'm always willing to do that. Here it is, and the reason nearly 60% of my net worth is invested in Apple along with some deep-in-the-money Apple bull call spreads. It's a pair of essays I wrote.  Here goes...

    INVESTMENT VERSUS SPECULATION

    The first level of wisdom a prospective investor hears and integrates is the old saw about diversification. And that's about as far as it goes for many.  The problem with diversification is that, even if you are diversified, you'll still likely have in your portfolio several holdings that don't fit the definition of a good investment.

    Those who go a bit farther in their studies begin to have a more nuanced comprehension and come to realize that not all businesses and opportunities represent investments. So what do these other businesses and opportunities represent if not investments? The answer is that anything that isn't an investment is speculation.  To be successful with individual stocks/businesses, you should carry in your mind a definition of these two concepts.  Here are my working definitions of the two terms:

    "An investment is a commitment to holding a security as long as the underlying fundamentals and business prospects remain intact." 

    Take Apple, for example. Apple shares are an investment as long as Apple continues to perform as well as it is currently performing. As long as it continues to generate the revenues and earnings it is currently generating.  Even if neither rise.

    "Speculation is a bet on some future outcome, either positive or negative, that would materially change the fortunes of a business."

    Note that the main difference here is that an investment relies upon the continuation of the status quo while speculation is a bet against the status quo.  

    GT Advanced Technologies (GTAT), a maker of solar manufacturing equipment, is an example of a speculative bet, and one that went terribly wrong for those who made that bet.  In 2012 and 2013, GTAT saw its solar business collapse under the weight of competition from Chinese manufacturers.  Late in 2013, GTAT partnered with Apple to manufacture sapphire displays, presumably for use on the iPhone 6.  GTAT needed that partnership to go well; it represented GTAT’s lifeline to a corporate reboot, a chance to reinvent itself in a new line of business in which it had little experience.  That reinvention, if successful, would materially enhance the value of the company.  If a failure, it would mark the collapse of GTAT as a viable business.  GTAT did fail, and filed for bankruptcy protection.  In the process, the share price went from a high of about $20 to about 40 cents.  Many of those holding the shares indignantly complained in online forums that their investment was wiped out by unscrupulous actions of GTAT's CEO and management team.  They weren’t wrong about the actions of GTAT’s management, but they were wrong in characterizing their GTAT holdings as an investment.  These people were speculating and paid a high price.

    It's those who don't understand the difference between an investment and a speculative bet who always end up convinced the market is rigged. These folks likely put money into one or more companies with business models that represented a speculative bet on some unlikely outcome, lost their money and associated that experience with the entire experience of participating in the market. How many times have you heard someone say the stock market is like a casino? Well, I liken the stock market, at the hands of a participant who has done his/her research and applied appropriate metrics, to a casino where you get to see your blackjack hand and the dealer’s up card before you place your bet and where you have the option of betting big, betting small, or not betting at all on each hand. The odds are strongly in your favor, but you can still do something foolish.  If you get your head on straight, stick to securities that represent a valid investment according to the above definition, and avoid speculation, at least until you have learned the hedging and other strategies associated with successful speculation, you’ll increase both your chances of a successful investment career and your returns throughout that career.

    CONCENTRATION VERSUS DIVERSIFICATION

    With the above in mind, you also need to be able to follow, closely, your investments. To follow a business, you need to understand the business and its success factors, its marketplace, its competition, how it compares to that competition, what technological changes are on the horizon that might impact the business, the legal, regulatory, and political landscape associated with the business, etc. Even so-called professional analysts, because they attempt to cover multiple, often many, businesses, nearly always get it wrong on a large and well followed and reported-on business like Apple.  How many people can follow even three companies, in three different industries, with different metrics as measures of success? How many even know the metrics of success for even one company in which they take a position? Stock picking, itself, is for the vast majority of those who participate, casino betting. Diversification, in this context, is appropriate since you would want to limit exposure to any individual bet.

    With the definition of investment in hand, it's a matter of screening for companies that are structurally sound; strong earnings at a relatively low multiple, solid balance sheet with net tangible assets not far below total stockholder equity (i.e., little of the company's assets represented by the Goodwill and Intangible Assets line items), and plenty of cash/cash equivalents to carry the company through downturns or changes in the direction of the business.

    Also look for a history of organic growth versus acquisition-based growth, a strong brand and competitive position, no significant impediments to growth, no significant risks such as lawsuits or potential for lawsuits (think medical device manufacturers and the hip implant lawsuits that have cost them billions), and technological leadership (which can be associated with the company's product technology or associated with process technology or even marketing technology; you want some significant technology lead that gives the company a clear edge).

    There are other things to look for, some that depend upon the particular business. I look for a business that excels in whatever metrics are most critical for success and growth in the industry/segment in which the business participates. And it should be comprehensible to a non-expert in the field; buy what you know.

    The temperament and discipline to stay the course and not get thrashed moving from one stock to another can be bolstered by having strong confidence in the businesses in which you place your investable funds, so knowing the workings of each business and its competitive environment is key. And that leads to the question... how much can you know about 10 businesses versus two or three at-a-time?  The answer is obvious and points to the fact that you should consider concentrating your holdings only when you know a business cold, and diversify your holdings when you don’t.  And leave speculation to those who know how to win at that game.
    I enjoyed that. Excellent. I agree with much of what you wrote.

    But would you have considered Enron an investment before they went down? I think many did. It was an old fashion energy company that seemed to be rock solid and was showing nice revenue and profit growth. Then BOOM. Gone. 

    I still believe diversification is important. Its just to risky to put your entire portfolio in 2 or 3 stocks. Even if one of them get crushed you will lose a massive amount of money. I agree that its very hard to follow and really know 10 companies or more. At this point I think I have a strong grasp of Apple and its business and will probably be an investor in Apple for several decades as long as they continue to show leadership.

    But I just can't see having 50%+ of my entire portfolio in a single company. Stuff can happen. Even to Apple. What if China completely closes its doors? What if Trump passes the 30% import tax? Apple could easily drop 40% in a few months. Its done that two times in the past 5 years in much less negative circumstances.

    So what is my current investment strategy?  Right now I put 60-80% of my money into very low fee index funds like Vanguard S&P500. That fund is up about 73% the last 5 years. Apple is up 76% the last 5 years. But just two months ago Apple was significantly under performing the S&P500 in the 5 year window.

    With the rest of the 20-40% of funds I use on individual stocks. I will usually have 1-4 stocks. So each position will at most only take up about 15-20% of my portfolio. Most will be under 10%.  I'm usually looking for deep value. Stocks that have been hammered because of short-term problems but are strong fundementally and for the long term.

    Regarding Enron, that would never make it to a significant portion of my portfolio for the same reason Chevron wouldn't.  Buy what you know.  I don't know the energy sector well enough to qualify any component as an investment.  And yet I've owned energy stocks, dry bulk shipping stocks, bank stocks, etc.  None of those industries I know well enough to put a significant portion of my investable capital into.  And so I diversify across multiple stocks and industries with some of my money.  If I don't know it cold, it goes in the diversify bucket.  

    But I worked for 26 years in the software and computer hardware business.  I'm a patented inventor, I've co-founded companies.  And so I know enough to grok Apple pretty deeply.  And I've made about, rough estimate, $900k on Apple since making my first trade in its options back in July 2011.  Only a bit later did I start owning shares.  I use options, to some extent, to profit from the swings, while holding the shares, for the most part, through the dips.  That helps on my taxes, but it's not the main reason I hold.  I hold because Apple meets my definition of an investment.  I have a very Buffett-like disposition when it comes to my core holdings.  
    I think many in the Energy field were shocked when Enron went under. Many were employees who had 100% of their retirement in Enron. I'm pretty sure many in the financial world were shocked when Bear Sterns went bankrupt. 

    You made $900k in Apple from 2011? Damn. How is that possible? Do you have multi-millions in shares? When you say options are you buying calls or selling calls? 

    So if 60% of your net worth is in Apple, you didn't get sick when it dropped from $134 to $90?  Or did you sell calls during that time period?


    Sick isn't close to the word for it.  Lol. But I knew the intrinsic value was much higher and I layered on debit call spreads (also called bull call spreads) with expiration dates laddered out over two years and with $95 and $97.50 long sides and $100 as the short strike.  I've had to close out every one of those very early at very close to max value due to the short side of the spreads being so deep in the money that it would have been virtually assured the stock would have been called away from me just prior to the recent ex-dividend date.  (Because the remaining extrinsic value was less than the dividend.)  On most of those I netted anywhere from a 60% gain to more than a double.  In about six months.  And I was carrying hundreds of contracts across all those many expiration dates.  Here's an example of just one; you can see the huge amounts of money being moved around, but it doesn't matter how big the numbers get; it's the spread that constrains both maximum exposure and maximum gain.  This was for 140 contracts of the $97.50/100 call spreads, which I closed out on Jan 3rd.  That one trade returned about $38k against, I think it was $17.5k invested in significantly less than a year.  I'm kinda the king of call spreads in my investing circle.


    edited February 2017
  • Reply 26 of 27
    radarthekatradarthekat Posts: 3,842moderator
    Hey Sog35, continuation of my last comment response.  Oops, my memory isn't perfect.  On that particular call spread it was a little over $16k profit on about $18k invested.  So that's as close as you need to a double.  In about six months of holding the trade.  

    Here's the excerpt on that trade from my closed positions page.  You always know you'll lose on the short strike (the higher of the two strikes), but you gain more, by the distance between the strikes, on the long side of the trade, if the stock rises to or above the short strike, in this case $100, and you hold until expiration when all extrinsic has evaporated on both strikes.  Your return is then the difference between the two strikes.  In this case, that's $2.50 * 140 contracts * 100 shares per contract, or $35k.  I closed the trade a little bit before expiration on the 20th and so there would have been some extrinsic remaining on each side and therefore I didn't quite achieve the $2.50 max value, but instead netted $2.44 per share, or $34.2k against the 14,000 shares represented by 140 contracts. 

    The math on my cost basis is $176,634.67 I paid for the long $97.50 calls, minus $158,706.16 I received from shorting the $100 calls, or a net cost for all 140 contracts of $17,928.51.  That comes to $1.28 per share for the spread.

    The amount I got when closing the trade is $251,455.86 received from selling the long $97.50 calls, minus $217,250.70 I had to pay to close the short $100 calls, for a total return of $34,205.16.  That came to $2.44 per share returned, just six cents below max value.

    Profit is therefore $34,205.16 minus $17,928.51 equals $16,276.65, as shown in the screen grab below.  That's a 90.78% profit on invested capital.  


    edited February 2017
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