Originally Posted by Dr Millmoss
I wasn't going back nearly that far to find PEs in the 30s. I was talking 2004-07. The market was pricing AAPL as a big growth story back then, and the market was right -- those multiples were entirely justified based on earnings growth rates. That earnings growth story hasn't ended, but the markets are trading AAPL as if it has, or will soon, especially since the last quarter of '10. You may recall that I got my head handed to me several months ago when I made the observation that AAPL had been underperforming the broader indexes for several months. It's still true, in spades.
I get the humor aspect, but what he said about the boogyman factor is quite true, I think. For any variety of reasons, the markets have never entirely bought into the Apple story. There's always been an underlying current of disbelief, of predicting its ultimate downfall. This sort of thinking about Apple has persisted for decades, that their success can't be anything more than transitory, a facade that will crumble in any strong breeze.
When you say "good value" I think "value stock." A growth stock trading like a value stock isn't a good value, it's a company leaving huge amounts of shareholder equity on the table.
Apple, being almost all a consumer electronics and computer company has been at a disadvantage. Since the recession, in particular, it's been thought of as more vulnerable to the vicissitudes of that consumer market. True or not, that's one thing holding the stock back. When a company grows enough to leave the smaller group that hold the stock, then broader ideas of what is expected from them become more apparent. We see this with Apple.
When Apple was a smaller company, and had what appeared to be more room to grow, and was much more specialized, it was held by those who believed in the company's look at the world. But when it grew so fast that other moved into the stock, along with many more analysts, the expectations changed.
It's true that the stock was fairly briefly in the 30's more recently, but it lived there for a much longer time in the 1990's.
It may be a value stock right now, but it isn't the company leaving the equity on the table, it's the market itself. And as you buy into the idea that whatever the stock is priced at is the true value, then the company is priced correctly according to those lights.
A quote from a previous post of yours here:
I'm sure we've discussed this before, but I've never really been on board with the concept of overvalued and undervalued. The market sets value every day, so in reality we are collectively setting the exact value of any stock at any given moment. Looking at it any other way IMO is a formula for driving yourself crazy.