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Buyback has saved Shareholders $16,000,000,000 so far

post #1 of 12
Thread Starter 

This is based on the 8K filed here:

 

http://yahoo.brand.edgar-online.com/DisplayFiling.aspx?TabIndex=2&dcn=0001193125-14-275598&nav=1&src=Yahoo

 

Facts:

 

1. Apple has bought back almost $51,000,000,000 in shares

2. Apple has bought back over 676,300,000 shares

3. Average cost of shares was $75.33

4. Gain per share is 31.4%

5. Total gain is $16,000,000,000

 

Conclusion:

 

The buyback has been a roaring success.  As a shareholder with $120k worth of stock I'm 100% happy with the results and the motivation behind the buyback.

 

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post #2 of 12
Quote:
Originally Posted by sog35 View Post

The buyback has been a roaring success.  As a shareholder with $120k worth of stock I'm 100% happy with the results and the motivation behind the buyback.

Buybacks are meant to be good for shareholders but your 'savings' and 'gains' are still based on a volatile stock price that is determined by traders. If traders next year decide they are bored with what Apple's doing, they can lower the price as they see fit and wipe out all of these gains. This is why it's not a good plan to trade all of Apple's assets for this volatile valuation (unless the assets are invested in something more volatile of course but they make a point of keeping them secure). When they have more cash than they need for security, spending it to maintain the stock price is a good thing to do. This short-term jumping up and down of 'wheee, the stock is going over $100' personal gain is irrelevant to Apple's long-term strategy. This company needs to stick around for the long long term as in Disney, Ford, Coca Cola.
post #3 of 12
Thread Starter 
Quote:
Originally Posted by Marvin View Post


Buybacks are meant to be good for shareholders but your 'savings' and 'gains' are still based on a volatile stock price that is determined by traders. If traders next year decide they are bored with what Apple's doing, they can lower the price as they see fit and wipe out all of these gains. This is why it's not a good plan to trade all of Apple's assets for this volatile valuation (unless the assets are invested in something more volatile of course but they make a point of keeping them secure). When they have more cash than they need for security, spending it to maintain the stock price is a good thing to do. This short-term jumping up and down of 'wheee, the stock is going over $100' personal gain is irrelevant to Apple's long-term strategy. This company needs to stick around for the long long term as in Disney, Ford, Coca Cola.

 

No they can't.

 

The stock went down in 2013 because earnings shrunk by 10-15% per quarter.

Traders can't control this stock by themselves.  The large funds control much more of the stock than any trading group.

 

The stock went up recently because earnings growth is back.

 

Very simple.  Grow earnings = stock goes up.  Shrink earnings = stock goes down.

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post #4 of 12
Quote:
Originally Posted by sog35 View Post

No they can't.

The stock went down in 2013 because earnings shrunk by 10-15% per quarter.
Traders can't control this stock by themselves.  The large funds control much more of the stock than any trading group.

The stock went up recently because earnings growth is back.

Very simple.  Grow earnings = stock goes up.  Shrink earnings = stock goes down.

This is completely wrong and you know it is because you've commented on Amazon's and Tesla's stock. If the stock price was tied to earnings, those stocks would be nowhere near where they are. The values are speculative. Apple is valued at $588b, where is that money? It doesn't exist, it's just what traders think Apple's worth and it can change tomorrow.
post #5 of 12
Thread Starter 
Quote:
Originally Posted by Marvin View Post


This is completely wrong and you know it is because you've commented on Amazon's and Tesla's stock. If the stock price was tied to earnings, those stocks would be nowhere near where they are. The values are speculative. Apple is valued at $588b, where is that money? It doesn't exist, it's just what traders think Apple's worth and it can change tomorrow.

 

Amazon/Tesla are not in the same situation as Apple.

Apple is a mature company.  Mature companies need to make profits and increase profits.  Amazon/Tesla need to grow revenue.

 

I'm just talking about Apple.

 

In 2013 Apple's earnings shrunk - the stock went down

In 2014 earnings grew - stock went up.

It really that simple.

 

Traders don't have the power to drive the stock price down no matter how hard they try if earnings is growing.  The large funds sold when Apple's earnings was tanking.  The stock also went down in late 2012/early 2013 because growth and momentum investors exited their positions.  In 2010-early 2012 Apple was growing earnings/revenue at over 50%.  By mid 2012 Apple was so huge that it was impossible for it to continue to grow 50% each quarter.  Thus it was a painful transition from growth to value/income.  But that only explains the drop from $700 to $600.  The rest of the drop was because of negative profit growth in 2013.

 

Look at the YoY profit growth.  Notice that the stock tanked when earnings was going down.  

 

  Profit Previous YoY Profit Growth
Q1 2013 13.1 13.1 0%
Q2 2013 9.5 11.6 -22%
Q3 2013 6.9 8.8 -28%
Q4 2013 7.5 8.2 -9%
Q1 2014 13.1 13.1 0%
Q2 2014 10.2 9.5 7%
Q3 2014 7.7 6.9 10%

 

The stock reached its low point of $385 right after the Q2 2013 earnings with profits shrinking 22% and then below $400 after the Q3 2013 earnings when profits shrunk 28%.

 

And notice when the stock stabilized.  Q4 2013 when the profit shrinkage slowed down to 9% and then flat in Q1 2014.  And now it exploded the last 2 quarters with 7% and 10%.

 

If Apple keeps growing earnings at 10%-15% no way on earth is this stock going to be below $90 or even close to its $55 low in 2013.

 

It is simple mathematics in the long term.  The stock value is based on the present value of future cash flows.  You can throw out Amazon/Telsa because those are momentum stocks.  But for Apple its earnings that counts.

 

See chart below for the relationship between Profit Growth and Stock Price

 

 


Edited by sog35 - 7/30/14 at 7:56pm
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post #6 of 12
Quote:
Originally Posted by sog35 View Post

The stock value is based on the present value of future cash flows.  You can throw out Amazon/Telsa because those are momentum stocks.  But for Apple its earnings that counts.

'Present value of future cash flow' = speculation. All stocks are evaluated the same way. Apple's consistently strong income is at least a firmer basis for a valuation but there's no direct correlation between earnings amounts and valuation amounts. Your last graph shows this, the curves are at times moving in opposite directions. Why does ~$30b net income per year lead to a $588b valuation? If Apple makes $30b net income per year for the next 100 years, why is their valuation not $3 trillion? If the timeframe is 10 years, why is it not $300b? These valuation amounts have nothing directly to do with Apple's income levels, it's how much the shares are worth to investors who are looking for returns and those investors will look for gains in their lifetime. They'll base it in part on earnings but it's also down to wild ideas about future products, which you mention often. You say things like 'it's a conservative valuation when you think of all the things Apple's going to do like an iWatch, a TV and so on' and analysts say the same. You have no idea what Apple's going to do or how it will be received. The stock comes crashing down when these wild ideas don't amount to anything and then instead of blaming the people making the crazy speculation, it's the company that gets the blame for not living up to it. There either needs to be a way to reduce the level of speculation in the stock market or their valuations have to be separated from what companies are actually doing with earnings, the stock market can't be both highly speculative and highly correlated with reported past and present earnings. The reality is somewhere in between and which side it's closer to varies from one stock to another but there is no such thing as an accurately valued stock because it's all perception of worth to an investor.
post #7 of 12
Thread Starter 
Quote:
Originally Posted by Marvin View Post


'Present value of future cash flow' = speculation. All stocks are evaluated the same way. Apple's consistently strong income is at least a firmer basis for a valuation but there's no direct correlation between earnings amounts and valuation amounts. Your last graph shows this, the curves are at times moving in opposite directions. Why does ~$30b net income per year lead to a $588b valuation? If Apple makes $30b net income per year for the next 100 years, why is their valuation not $3 trillion? If the timeframe is 10 years, why is it not $300b? These valuation amounts have nothing directly to do with Apple's income levels, it's how much the shares are worth to investors who are looking for returns and those investors will look for gains in their lifetime. They'll base it in part on earnings but it's also down to wild ideas about future products, which you mention often. You say things like 'it's a conservative valuation when you think of all the things Apple's going to do like an iWatch, a TV and so on' and analysts say the same. You have no idea what Apple's going to do or how it will be received. The stock comes crashing down when these wild ideas don't amount to anything and then instead of blaming the people making the crazy speculation, it's the company that gets the blame for not living up to it. There either needs to be a way to reduce the level of speculation in the stock market or their valuations have to be separated from what companies are actually doing with earnings, the stock market can't be both highly speculative and highly correlated with reported past and present earnings. The reality is somewhere in between and which side it's closer to varies from one stock to another but there is no such thing as an accurately valued stock because it's all perception of worth to an investor.

 

no direct correlation between earnings amounts and valuation amounts.

 

Can you not read the graph?  Apple's low stock price points correlated with negative earnings growth.  When growth was down 22% and 28% the stock was at $385.  When earnings grew 7% and 10% the stock blew up to near $700.  I don't understand why you can't see that.  Its as clear as day on the chart and graph.

 

If Apple makes $30b net income per year for the next 100 years, why is their valuation not $3 trillion? If the timeframe is 10 years, why is it not $300b?

 

Its not $300B because investors don't expect earnings to be flat at $30B.  They expect it to grow 5-15% per year.  It is not $3 Trillion because you need to take into account the time value of money.  100 years is a lot of interest.  That's why I said you need to take the present value.  If you are going to do a 100 year valuation you need to discount the cash flows for 100 years and compare it to 100 years of inflation.

 

Of course there are other factors that can affect stock price.  But by far the most important factor is profits and if the market believes these profits will grow in future years and are sustainable.  Even your comment about product rumors are directly related to future profits.  Take any 20 year graph of a company and the trend line of profit grow is directly correlated to stock price.  The exception are stocks that are in the GROWTH phase such as Amazon/Telsa because at that point revenue growth is more important than profits growth.

 

Do you invest regularly in the stock market?  I ask because many new investors get caught up in things like rumors and other BS.  But the truth is long term its all about profits.  I've been doing this for a while.  Been through the 2000 crash and 2007 crash.  But I have not been burned because my stock decisions are always based on profits and future profits.


Edited by sog35 - 7/31/14 at 5:51am
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post #8 of 12
Quote:
Originally Posted by sog35 View Post

no direct correlation between earnings amounts and valuation amounts.

Can you not read the graph?  Apple's low stock price points correlated with negative earnings growth.

That's an indirect correlation. It's not consistent.
Quote:
Originally Posted by sog35 View Post

by far the most important factor is profits and if the market believes these profits will grow in future years and are sustainable.

'if the market believes' = speculation
Quote:
Originally Posted by sog35 View Post

Even your comment about product rumors are directly related to future profits.  Take any 20 year graph of a company and the trend line of profit grow is directly correlated to stock price.  The exception are stocks that are in the GROWTH phase such as Amazon/Telsa because at that point revenue growth is more important than profits growth.

I think you'd have difficulty proving that. If it was so predictable, computerized traders wouldn't have to use any tricks to profit, they'd simply plug in earnings results to their algorithms and profit all the time. This doesn't happen.

For you to reach the conclusion that the stock market is rational, you'd have to determine that the people and computers trading on it are for the most part making rational decisions.
post #9 of 12
Thread Starter 
Quote:
Originally Posted by Marvin View Post


That's an indirect correlation. It's not consistent.

'if the market believes' = speculation

I think you'd have difficulty proving that. If it was so predictable, computerized traders wouldn't have to use any tricks to profit, they'd simply plug in earnings results to their algorithms and profit all the time. This doesn't happen.

For you to reach the conclusion that the stock market is rational, you'd have to determine that the people and computers trading on it are for the most part making rational decisions.

 

It is a direct correlation.  If you can't see that I'm sorry.  If you are not a growth company like Amazon profits and future profits are king.  If not explain why Apple's stocked tanked when profits tanked?  Explain why the stock exploded up when profits went back up?

 

In the long term market belief is not speculation.  Its based on FACTS.  Is it a guarantee?  Hell no.  But to think the whole market is based on random events is being ignorant.

 

Why don't computerized traders based their trades strictly on profits?  Because they have the potential to make more money basing their trades on daily movements.  Which has more potential for profits?  Holding Apple from 2012 to now?  Or sell in 2012.  Shorting the stock in 2013.  Rebuying in 2013 and selling again in 2014.  Traders want to maximize profits even if it adds risks.  That is short term trading.  But if you look LONG-TERM (talking 10-20 years) you will see that these short term movements are negated by the companies profitability.

 

Again I ask.  Do you invest in individual stocks?  If not I can understand why you think the market is irrational.  It may seem like that if have not been following it for a while.  If all you see is a few months or years then the stock market can look very irrational.  You need to understand I'm talking about investing not trading aka gambling.  Investing involves holding stock for 10 or even 20+ years. 

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post #10 of 12
Quote:
Originally Posted by sog35 View Post

It is a direct correlation.  If you can't see that I'm sorry.

Apology accepted.
Quote:
Originally Posted by sog35 View Post

explain why Apple's stocked tanked when profits tanked?  Explain why the stock exploded up when profits went back up?

Indirect correlation. You're cherry picking where the stock follows profit growth, there are lots of other times it doesn't. Explain why AAPL has dropped from 99 to 96 just now. Explain why in August 2008, just after Apple reported record earnings in July 2008 with revenue up 38%, income up over 30%, their stock price collapsed from $25 to under $14, it took a year to go back up:

http://www.apple.com/pr/library/2008/07/21Apple-Reports-Record-Third-Quarter-Results.html

You might say that it corrected itself long-term but you are doing short-term correlations between Apple's recent stock movement and declaring there is a direct correlation between the two.
Quote:
Originally Posted by sog35 View Post

In the long term market belief is not speculation.  Its based on FACTS.  Is it a guarantee?  Hell no.

You have to use different terms because there are opposites in there.

Belief is not fact and a fact is a guarantee, which you've said it isn't. There are no future facts. All facts are present or past.
Quote:
Originally Posted by sog35 View Post

But to think the whole market is based on random events is being ignorant.

I didn't say that at all. I said it was based arbitrarily between earnings and speculation.
Quote:
Originally Posted by sog35 View Post

You need to understand I'm talking about investing not trading aka gambling.  Investing involves holding stock for 10 or even 20+ years.

How can you possibly assess what earnings will be 10-20 years down the line? Apple was nearly bankrupt at one point, there was no indication that Steve Jobs would return to Apple, they'd move to OS X, they'd make the iPod, the iPhone then iPad. You could never foresee those events. If anyone suggested that investing in Apple 20 years ago was a rational investment while Amelio was running it into the ground, they are kidding themselves. If they invested at that point, they lucked out big time but it was luck and nothing more.

That's not to say that value investing is all luck because you can become a majority shareholder and have a say in who runs a company but it doesn't always go smoothly, even for the best of them:

http://www.reuters.com/article/2014/03/01/us-berkshire-results-energyfuture-idUSBREA200QG20140301
http://www.forbes.com/sites/moneybuilder/2013/05/08/the-worst-investment-of-warren-buffetts-career/

Reporters are so brutal, you're only as good as your last success. That first link uses the description "Buffett, the so-called Oracle of Omaha". Ouch.
post #11 of 12
Thread Starter 
Quote:
Originally Posted by Marvin View Post



Indirect correlation. You're cherry picking where the stock follows profit growth, there are lots of other times it doesn't. Explain why AAPL has dropped from 99 to 96 just now. Explain why in August 2008, just after Apple reported record earnings in July 2008 with revenue up 38%, income up over 30%, their stock price collapsed from $25 to under $14, it took a year to go back up:

 

 

Today's movement is a short term movement.  The overall market was down about 2% and Apple just reached a 52 week high this week, it was due to pull back a little.  Like I said you need to focus on the long term.

 

Why did Apple's stock tank in Aug 2008? Apple closed at $23.17 at the end of August, which was higher than $22.71 on earnings day in July.  You just proved my point even more.  The stock went up with great earnings.

 

http://finance.yahoo.com/q/hp?s=AAPL&a=06&b=1&c=2008&d=07&e=31&f=2008&g=d

 

 

The stock did crash latter in the year because of the FINANCIAL CRISIS that almost took out the worlds financial systems.  The entire market was down 30%.

 

My graph shows 2 years of profits vs stock price.  I'm pretty sure if you extend the graph 10 years you will see the same trend.

 

Stop trying to change the nature of the universe.  Companies that make money are worth more than companies that don't.  Its such a simple an obvious truth that I can understand why you can't accept it.


Edited by sog35 - 7/31/14 at 1:47pm
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post #12 of 12
Quote:
Originally Posted by Marvin View Post

For you to reach the conclusion that the stock market is rational, you'd have to determine that the people and computers trading on it are for the most part making rational decisions.

 

Individuals are rational, groups are not only irrational...they are dangerous. :D

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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