APPL is a safe heaven for large institutional investors, usually Mark to Market valuations of such funds benefit from stable tech stocks that don't give dividends. APPL is usually found swilling around in moderately large mutual fund portfolios - large cap funds may have up to 2 - 3% APPL in them. Around 70% of APPL stock is held by such funds, around 25% or more is going to be members of the Apple board, with probably only a couple of percent held by people like you and I.
You've made a lot of pretty wild (and unsubstantiated) statements so far, and I won't respond to most of them - I am sure I'll have more opportunities!
But I did want to address a few points in just this one small post of yours.
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Originally Posted by Zoolook
APPL is a safe heaven for large institutional investors, usually Mark to Market valuations of such funds benefit from stable tech stocks that don't give dividends.
What is a 'safe heaven' [sic] for large institutional investors? Care to explain? And in what way is Apple a safe haven? How does mark-to-market accounting 'benefit' from stability? Surely, that depends on whether the market is rising or falling? And, in what way is Apple a 'stable' tech stock? Using what metric/benchmark? And, what is the connection between stability in tech and non-dividend payments?
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Originally Posted by Zoolook
APPL is usually found swilling around in moderately large mutual fund portfolios - large cap funds may have up to 2 - 3% APPL in them
What is a stock that 'swills around?' What is a 'moderately large mutual fund?' 2-3% of AAPL, meaning 2-3% of their fund, or 2-3% of AAPL? And, if the former, do you know that tax laws encouraging prudential diversification require you hold no more than 5%? So, why would be surprising or unusual? Is it different for any other major tech stock?
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Originally Posted by Zoolook
Around 70% of APPL stock is held by such funds
Is that any different from that for any large tech company? In what way is Apple different? Care to tell me what the % institutional holding for Microsoft is? Or Intel? Or HP? Or Dell?
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Originally Posted by Zoolook
.... around 25% or more is going to be members of the Apple board, .......
This one statistic alone gives away the fact that you are an utterly clueless bloke, blowing smoke. Care to provide a cite?
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Originally Posted by Zoolook
....with probably only a couple of percent held by people like you and I.
'Me.' (Wording issues aside, care to provide a cite to the actual data)?
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Originally Posted by Zoolook
.....
Please stop already with your utterly inane, unsubstantiated, overblown, under-cited assertions.
The first problem is, you'd have an awfully difficult time predicting when this will occur, so it's fundamentally a predictor of nothing. Second, market cap isn't really a measure of anything but investor sentiment at any given moment in time. Not much more than six months ago, Apple's market cap was half of what it is today, so by that measurement, Apple has doubled in size in just the last few months. Of course we know that isn't really true -- market cap all about valuations, it has little directly to do with profits.
So even by this arbitrary rule, and a meaningful measurement, what Apple has accomplished in terms of EPS growth over the last ten years has to be considered something akin to a mathematical impossibility. But it happened.
What does tell you about the future? Absolutely nothing.
You may wish to mull over thus basic truism in finance: The value of a share is simply the sum, from today to some (fairly far away) future point in time, of a set of expected future cash flows to equityholders discounted back to the present at an appropriate cost of equity. Period.
When you make a statement such as "Of course we know that isn't really true -- market cap all about valuations, it has little directly to do with profits..." it betrays to me that you have trouble with some basic concepts in finance. If you'd like me to back up what I am saying, I could give you, for starters, say, a half-dozen cites. And, they would be no more than basic, well-known, widely-accepted, finance textbooks. (And if you really push me, I'd like to give you the actual Chapter cites too, but that would have to be tomorrow - I am going to turn in after this post.... yawn...)
And, fwiw, Apple's 'EPS growth' this past decade is not a mathematical impossibility. Far from it. Quite apart from the fact that 'EPS' confounds two metrics (E and #S), there are dozens of companies that have done what Apple did.
It's the law of large numbers. Apple's market cap is so large that it is impossible to grow at past high rates. The tablet will probably be a big hit and iPhone will take more market share than sj dreamed of a few years ago but I think the stock will languish.
The desktop and laptop market is dead as a growth engine. Even Microsoft saw that years ago.
After the recession is over, Apple's growth levels will increase substantially. Even over the next 12 months it will move upwards. It's already started to in a small way this last quarter. iPod sales drops are attributed to factors that include the recession, but also the fast growth of iPhones.
One thing I've wondered about Apple (and about Microsoft and Google, for that matter)... with the power of all of those brilliant engineers and programmers working for them, how is it that they have never managed to create their own stock trading programs to challenge the computing firepower of a Goldman Sachs, for example? It's like they are only using a tiny percentage of their brains!
We don't know what they're doing. But at the conference, they said that their investment policy at this time is directed towards conserving their cash. Translate to mean "protecting our investments in a difficult time for investments".
Some other companies with large cash and investment holdings have announced some losses there. Apple's done very well.
I don't know about Google, but I believe that MS did say their holdings had taken a hit.
I also think that these companies are smarter than Goldman and the rest. Goldman hs done ok because of the governments actions right now. Though, at this time, they're denying that they ever said they were in big trouble, even though it's a matter of record.
Interesting article in the Times about that the other day.
What does "market cap" have to do with earnings growth potential?
Answer: Not one damned thing.
I think what he's saying that when a company gets very large, it's difficult to continue the same growth rates it had when it was smaller. I don't think he was meaning "earnings growth potential".
I didn't get that he was talking about "market cap" but rather growth of sales.
You may wish to mull over thus basic truism in finance: The value of a share is simply the sum, from today to some (fairly far away) future point in time, of a set of expected future cash flows to equityholders discounted back to the present at an appropriate cost of equity. Period.
Yes, and if you'd read all the words I wrote...
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When you make a statement such as "Of course we know that isn't really true -- market cap all about valuations, it has little directly to do with profits..." it betrays to me that you have trouble with some basic concepts in finance. If you'd like me to back up what I am saying, I could give you, for starters, say, a half-dozen cites. And, they would be no more than basic, well-known, widely-accepted, finance textbooks. (And if you really push me, I'd like to give you the actual Chapter cites too, but that would have to be tomorrow - I am going to turn in after this post.... yawn...)
So Apple doubled in size during the last six months? Is that what you are really trying to tell me?
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And, fwiw, Apple's 'EPS growth' this past decade is not a mathematical impossibility. Far from it. Quite apart from the fact that 'EPS' confounds two metrics (E and #S), there are dozens of companies that have done what Apple did.
I know that's what Apple did. That was precisely my point. There isn't any rule on heaven or earth that says it can't continue. Will it? I have no idea. It's the people claim to know, based on some arbitrary concept, that I have a quarrel with. You could easily have applied that same concept to Apple three years ago, after all the iPod driven growth was beginning to level off, and you'd have been dead wrong.
Apple isn't mining bauxite, they make consumer products. If they continue to pull rabbits out of their hats by making new products people really want, then the rule does not apply. Period.
I think what he's saying that when a company gets very large, it's difficult to continue the same growth rates it had when it was smaller. I don't think he was meaning "earnings growth potential".
I didn't get that he was talking about "market cap" but rather growth of sales.
He'll have to come back and explain.
I refer back to:
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Apple's market cap is so large that it is impossible to grow at past high rates.
Market cap. Impossible. I can't agree with either the method of measurement, or the conclusion.
First of all, it's earnings that matter, not market cap. Second, Apple can indeed continue to grow earnings at recent-past rates. Is it going to be easy? No. Has it been easy? No, it might only look that way. The last two big spurts of growth were driven by different products, both huge hits. If they're going to continue growing at the past rate, they'll need an Act Three. I won't even begin to pretend to know whether it will happen, because in all honestly, I didn't predict the first two acts, and I never met anyone who did,
Market cap. Impossible. I can't agree with either the method of measurement, or the conclusion.
First of all, it's earnings that matter, not market cap. Second, Apple can indeed continue to grow earnings at recent-past rates. Is it going to be easy? No. Has it been easy? No, it might only look that way. The last two big spurts of growth were driven by different products, both huge hits. If they're going to continue growing at the past rate, they'll need an Act Three. I won't even begin to pretend to know whether it will happen, because in all honestly, I didn't predict the first two acts, and I never met anyone who did,
You're right. Even though he said it, I didn't catch it.
I agree with what you say on that. Somehow, I thought he was saying that the companies growth would have to slow down.
Just goes to show that when you expect something, you see it. It wouldn't occur to me that someone would say that.
You understand the difference between realized and unrealized PnL right? Until you sell, it's unrealized and (heaven forbid) if Apple were to get themselves into trouble for any bizzare reason, your investment might suddenly deliver nothing. Sure, with Apple that's exceptionally unlikely given the current market and their cash reserves, but not entirely unprecedented. You could have bought APPL in 1987 at $13, you' have only just broken even in 2004. An investment of $10,000 even with a 0.02 yield (reinvested) on the other hand, would have netted the investor $5,000 profit in the same period, meaning the share price would need to collapse to half its value to suffer an actual loss.
Many day traders are tying to ride APPL up and down, making buy-and-hold investments risky, because small time investors never know when they may actually need that cash and be forced to sell. A dividend always means you can ride a small price drop and still come out on top in the medium term.
Before telling someone out and out that they're wrong, you might want to find out what they do for a living. Drop me a PM and I'll tell you.
Not right. AAPL split in June of 1987 and June of 2000. The $13 price is 2x split adjusted. But you have 4X the shares in 2004 than in 1987 (if you didn't sell any). So a $10,000 investment in 1987 (before the split) would be worth $40,000 in 2004. At the same split adjusted price of $13 per share (around $52 actual share price at the time). So that's a $30,000 profit. Not a break even. And AAPL split again in the beginning of 2005.
Edit- Added Comment-
If you had bought $10,000 of AAPL at $52 in Jan. of 1987 you would have about 200 shares in 1987. 400 shares in the middle of 1987. 800 shares in the middle of 2000. And 1600 shares in the beginning of 2005. Today, those 1600 shares of AAPL would be worth about $264,000. Your base price per share would be $6.50. Apple has $28 per share in cash alone.
It's the law of large numbers. Apple's market cap is so large that it is impossible to grow at past high rates. The tablet will probably be a big hit and iPhone will take more market share than sj dreamed of a few years ago but I think the stock will languish.
The desktop and laptop market is dead as a growth engine. Even Microsoft saw that years ago.
Apple ability to grow has nothing to do with the size of it's market cap. The growth rate is already factored into the market cap. The more growth anticipated, the higher the share price, the larger the market cap. It's not the other way around. Market cap do not determine the growth rate.
But Apple ability to grow has everything to do with their penetration into the market they're in. Right now Apple has less than 4% of the World computer market. Less than 2% of the cell phone market. Digital downloaded music just taking off and Apple stands to will get the lion share of that. Downloaded video is just taking off but still up for grabs. The only market that Apple may be saturated in is the MP3 player market. But who knows what market Apple will enter or create next. Apple large market cap is not a hinderance when you consider this.
Dell on the other hand has a market cap about 1/6 of Apple. But Dell has over 20% of the World computer market. Dell's small market cap is not going to help Dell grow at a faster rate than Apple. It will almost be impossible for Dell to just gain 50% more of the World computer market share. Where as it's very possible that Apple can double it's World computer market share.
Microsoft has a market cap that is only 25% larger than Apple. But Microsoft has 90% of OS market and over 80% of the office suite. The two biggest money maker for Microsoft. Microsoft doesn't stand a chance of growing as fast as Apple unless it enters another market that it can succeed in. It's not Microsoft market cap that hinders it growth. But the fact that Microsoft already saturated the market where it's making the most money in.
After the recession is over, Apple's growth levels will increase substantially. Even over the next 12 months it will move upwards. It's already started to in a small way this last quarter. iPod sales drops are attributed to factors that include the recession, but also the fast growth of iPhones.
everyone has an iphone. at least it seems like at least half the people on the NYC subway have an ipod or an iphone. the big growth is over. i remember back in 2003 i'd see one ipod a week.
and most of us iphone owners are going to stay with Windows until Apple comes down from it's ridiculous pricing or puts more horsepower into it's computers.
You made some pretty quick and big assumptions about me, and you know noting about me. Why should I assume that what you say means anything to my well used methods?
Fair enough, I could say the same is true but as the new guy here, the onus is on me to earn your trust, not the other way around. Apologies.
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And now that programmed trades are 90% of the business, it's a problem. humans simply can't interact quickly enough when problems occur from this, and if you are in the business you know very well about the instances that have occured. This will happen more often, and the problems will escalate.
I agree with your whole post here, but what I would say is that these machines are not really capable of driving trends over a sustained period of time, or even following them. A machine won't be able to tell the difference between a rumor and a fact for example (say about Mr Jobs), they're much more concerned about eeking out pennies and cents in the tiny second by second fluctuations in the market. (I am referring specifically to HFT computers, not programs that wait for the price to drop to $20 before buying 10,000 lots, which have been around since the 1980's).
Now of course you could ask what social benefit this brings to the world (answer is none) or how listed companies benefit (they don't), or even how investors benefit (fine if you bought Goldman Sachs in January) but I don't see real traders being replaced by these things in the forseeable future; in fact, they're usually run by traders anyway.
So Apple doubled in size during the last six months? Is that what you are really trying to tell me?
Good point. I interpreted the original Al Bundy reference to 'market cap' being the intrinsic value represented by the sum of all expected discounted future cash flows. (The reason that Apple -- and hundreds of other stocks -- fell across-the-board was because market risk premia went up substantially during the financial crisis. It would seem that risk premia have returned closer to historical levels.)
One could argue that Apple was undervaled at $75 (or whatever the low was) a few months ago (and those of us who thought that bought ), and reasonably priced today given its expected future growth rates. The larger point Al Bundy was making was that, given the fact that there is a realtively fixed (or slowly growing) aggregate market, higher growth rates will have to come from expanding market share. The larger you are, the more difficult it is. Just as the iPod has matured, so will the iPhone after the Verizons and the Chinas have been penetrated (perhaps the market factors those in already, we don't know). While we might say that Apple still has room for growth in its computer share, Apple's share as an individual company is in the ball-park of shares of other individual companies such as Dell and HP; it is unlikely that they can have a share that is subtantially higher or lower than firms like that.
All that said, will I sell my AAPL at the current price? Definitely not. Do I expect it to go higher? Definitely yes. But do I expect the stock to increase in value by 10X in the next 5 years like it did the past five? No, since that would require AAPL to trade at $1600 and the company's market cap to be $1.5 trillion. I think that is all that Al Bundy was saying.
What is a 'safe heaven' [sic] for large institutional investors? Care to explain? And in what way is Apple a safe haven? How does mark-to-market accounting 'benefit' from stability? Surely, that depends on whether the market is rising or falling? And, in what way is Apple a 'stable' tech stock? Using what metric/benchmark? And, what is the connection between stability in tech and non-dividend payments?
Oops, heaven wasn't a clever metaphor it was a typo.
Because any portfolio will contain securities that move up and down contrary to each other or have offset cycles; basic materials, manufacturing, commodities, retail sales etc. Not sure what you're asking here, it seems rhetorical.
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What is a stock that 'swills around?' What is a 'moderately large mutual fund?' 2-3% of AAPL, meaning 2-3% of their fund, or 2-3% of AAPL? And, if the former, do you know that tax laws encouraging prudential diversification require you hold no more than 5%? So, why would be surprising or unusual? Is it different for any other major tech stock?
Swills around is a poor metaphor, but really, was it worth pointing out?
I meant 2-3% of their fund, and I was also pointing out this is a large amount, not a small amount, so your comment about diversification wasn't necessary. We're not talking about other tech companies, although it would be similar for other large cap tech stocks.
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This one statistic alone gives away the fact that you are an utterly clueless bloke, blowing smoke. Care to provide a cite?
70% of the stock is instutionally owned, a simple google search will show that. This isn't wikipedia or 10th grade so I didn't think I needed to cite that, but I'll make an effort to back up wild stats in future and not post exhaggerations for dramatic effect, which is what I did. I rushed my post to be honest, the 25%, I pulled out of my arse.
So, there are 17 members of the board, assuming 30,000 chares each, plus 10,000 purchased (we know Eric didn't take this up, so it's probably a wrong assumption anyway) is around half a million shares - there are 895 million shares on the market, so at most the board would have 0.57% of the shares.
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'Me.' (Wording issues aside, care to provide a cite to the actual data)?
Actually 'you and I' is perfectly acceptable in written English, particularly British English, although my wife (who's a journalist) pulls me up on this all the time, so she shares your opinion. When people point things like this out on forums though, it's somewhat inimical.
Let's put it this way. Announcing a product or NOT announcing a product will affect the company's stock outlook. What do you think of those apples.
well what the comment about Verizon shows is that this guy isn't really thinking. I know he's all "Apple would increase their user base cause so many folks didn't want to switch to get the iphone cause they like Verizon, etc"
but what he disregards is that Verizon is using a totally different flavor of phone tech. to create a device for Verizon would require Apple to re-invent the wheel to a serious degree. Also you can bet that Verizon would want an exclusive and we know the flack that Apple is getting on the phone.
I for one can't see it. it isn't logical from a technological point of view and from a legal one I would not be shocked if ATT got it worded in their contract that ANY device that had built in cell data capabilities was exclusive to ATT for the length of the contract. It would be idiotic to have otherwise. So from both views, it makes more sense that any new (non iphone) devices will be held until the contract is over. perhaps with a wifi only first gen and then a wifi/cell second gen. and anything coming out would be set up with Apple's choice of tech (being GSM then into the next gen of specs) but unlocked to work with any company that can handle it. same as further iphone versions at that point.
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Originally Posted by SpamSandwich
No, the Back To School selling season has already begun. Something that Apple needs to be taken to task over, IMO.
I disagree. the only flaw they have had is refreshing the laptops 4-5 weeks after that period. this year they did better by doing it a month into the 'season' when they had not yet had the large flow of sales, which was better. a refresh to officially kick off the season would be best, imo.
but a computer is not something you can buy, turn on and be comfortable with in one night. students need at least a couple of weeks go get really going, make sure they have all the software they need, get the right details from IT for their email etc.
the only flaw left is that it doesn't work for high school students. I think if Apple would to open it up to that group they would be in business. cause many schools are asking and a few are requiring access to a home computer and/or laptop. at least in larger cities.
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There ARE retail selling seasons that they simply do not take advantage of, and that is simply bad business.
the business retail season is still "Christmas" and Apple definitely works around that period as much as they can.
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Originally Posted by SpamSandwich
And since the hummingbirds are all over the notion of some kind of iTablet about to make it's debut, it would be too late for back to school. That is all.
that presumes that the iTablet would be a device marketed to and even useful to students. the dominate theory is that it will be a 'netbook' in the truest since. a device for doing net activities (email, aim, web browsing) with perhaps itunes added in. in other words, a giant iphone/touch (running that software) NOT a full on notebook. which is what is more useful to students.
Microsoft has a market cap that is only 25% larger than Apple. But Microsoft has 90% of OS market and over 80% of the office suite. The two biggest money maker for Microsoft. Microsoft doesn't stand a chance of growing as fast as Apple unless it enters another market that it can succeed in. It's not Microsoft market cap that hinders it growth. But the fact that Microsoft already saturated the market where it's making the most money in.
This is the crux of the matter, IMO. Apple has successfully found and exploited new markets for driving growth, instead of trying to squeeze more out of the markets they were already in. This is the single, largest difference between Apple and Microsoft, and the reason why Apple has been experiencing explosive growth and Microsoft has not.
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Originally Posted by anantksundaram
Good point. I interpreted the original Al Bundy reference to 'market cap' being the intrinsic value represented by the sum of all expected discounted future cash flows. (The reason that Apple -- and hundreds of other stocks -- fell across-the-board was because market risk premia went up substantially during the financial crisis. It would seem that risk premia have returned closer to historical levels.)
I try to respond to what people actually write, just as I hope others will do for me.
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One could argue that Apple was undervaled at $75 (or whatever the low was) a few months ago (and those of us who thought that bought ), and reasonably priced today given its expected future growth rates. The larger point Al Bundy was making was that, given the fact that there is a realtively fixed (or slowly growing) aggregate market, higher growth rates will have to come from expanding market share. The larger you are, the more difficult it is. Just as the iPod has matured, so will the iPhone after the Verizons and the Chinas have been penetrated (perhaps the market factors those in already, we don't know). While we might say that Apple still has room for growth in its computer share, Apple's share as an individual company is in the ball-park of shares of other individual companies such as Dell and HP; it is unlikely that they can have a share that is subtantially higher or lower than firms like that.
Markets decide valuations on a daily basis, that's what they are for. These valuations are predicated on the greed-fear continuum, with actual profits often overlooked on both ends of the scale. Profits do come into play at some point, but we can't expect stock valuations to be logically attached to earnings over the short term.
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All that said, will I sell my AAPL at the current price? Definitely not. Do I expect it to go higher? Definitely yes. But do I expect the stock to increase in value by 10X in the next 5 years like it did the past five? No, since that would require AAPL to trade at $1600 and the company's market cap to be $1.5 trillion. I think that is all that Al Bundy was saying.
Or more to the point, they'd have to grow earnings to something like $50/share from the current $5-6/share. Likely? No, but then, neither was the run they've had. A couple more huge hit products in new markets, and they could do it.
everyone has an iphone. at least it seems like at least half the people on the NYC subway have an ipod or an iphone. the big growth is over. i remember back in 2003 i'd see one ipod a week.
and most of us iphone owners are going to stay with Windows until Apple comes down from it's ridiculous pricing or puts more horsepower into it's computers.
That's by no means true.
Apple's iPhone sales are expected to rise considerably, as are the sales of the Touch.
Apple's computer sales will rise much faster again. That's already begun in a smaller way
I agree with your whole post here, but what I would say is that these machines are not really capable of driving trends over a sustained period of time, or even following them. A machine won't be able to tell the difference between a rumor and a fact for example (say about Mr Jobs), they're much more concerned about eeking out pennies and cents in the tiny second by second fluctuations in the market. (I am referring specifically to HFT computers, not programs that wait for the price to drop to $20 before buying 10,000 lots, which have been around since the 1980's).
It isn't the long term trading that's a problem with this. It's the millions of trdes that are done in one second that are the problem. It's a positive feedback loop. In just a couple of minutes, entire sections of the market can collapse. The intent is to make these programs handle more and more of the trading, in more areas. By the time someone notices what's going on, and that may just take 30 seconds, the problem is already too big. By the time they can send the messages across to those who can actually do something, its another minute or two. By that time, the entire system could have come crashing down.
It's naive of those who are promoting these systems to think that they work well when they don't. They can't deal with sudden hiccups. That's why many in the industry are so concerned. But the problem is that trading is about one thing only, making money for those involved, no matter what the cost to the economy as a whole, or anything else for that matter.
Just like what we're going through with Bank of America and the bonus situation. Same thing with what's his name at Citigroup who is getting that $100 million bonus.
That's the big problem here. This should be slowed down until someone actually understands it, because it's obvious that no one designing and using these systems does.
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Now of course you could ask what social benefit this brings to the world (answer is none) or how listed companies benefit (they don't), or even how investors benefit (fine if you bought Goldman Sachs in January) but I don't see real traders being replaced by these things in the forseeable future; in fact, they're usually run by traders anyway.
Well, with 90% of the trades being done without the intervention of traders, I can't agree with that last.
There are so many trades being done these days, that it may seem as though much of it is being done through traders, but it isn't.
I remember when I was in elementary school in the late 1950's that trade numbers on the NYSE were about 1.5 million a day. Look at what's happened since then. Most of this is due to computers, first manually, and now, automatically.
everyone has an iphone. at least it seems like at least half the people on the NYC subway have an ipod or an iphone. the big growth is over. i remember back in 2003 i'd see one ipod a week.
and most of us iphone owners are going to stay with Windows until Apple comes down from it's ridiculous pricing or puts more horsepower into it's computers.
Everyone does not have an iPhone. Consider all the other carriers people refuse to switch from and you see additional potential for growth. Consider all of the potential growth through China Unicom, and you can imagine even more growth. There is still a lot of growing left for iPhone.
I remember when I was in elementary school in the late 1950's that trade numbers on the NYSE were about 1.5 million a day. Look at what's happened since then. Most of this is due to computers, first manually, and now, automatically.
Also, a lot more shares to be traded, and a lot more traders to trade them. Anyway, what all of this automatic electronic trading really does (or so it seems to me) is exaggerate the tendency for the markets to move on momentum. Often stocks go up for no other reason than they are going up, and down because they are going down. It's the pile-on effect. In theory this all cancels out in the long run, but the run can be pretty long sometimes.
Comments
APPL is a safe heaven for large institutional investors, usually Mark to Market valuations of such funds benefit from stable tech stocks that don't give dividends. APPL is usually found swilling around in moderately large mutual fund portfolios - large cap funds may have up to 2 - 3% APPL in them. Around 70% of APPL stock is held by such funds, around 25% or more is going to be members of the Apple board, with probably only a couple of percent held by people like you and I.
You've made a lot of pretty wild (and unsubstantiated) statements so far, and I won't respond to most of them - I am sure I'll have more opportunities!
But I did want to address a few points in just this one small post of yours.
APPL is a safe heaven for large institutional investors, usually Mark to Market valuations of such funds benefit from stable tech stocks that don't give dividends.
What is a 'safe heaven' [sic] for large institutional investors? Care to explain? And in what way is Apple a safe haven? How does mark-to-market accounting 'benefit' from stability? Surely, that depends on whether the market is rising or falling? And, in what way is Apple a 'stable' tech stock? Using what metric/benchmark? And, what is the connection between stability in tech and non-dividend payments?
APPL is usually found swilling around in moderately large mutual fund portfolios - large cap funds may have up to 2 - 3% APPL in them
What is a stock that 'swills around?' What is a 'moderately large mutual fund?' 2-3% of AAPL, meaning 2-3% of their fund, or 2-3% of AAPL? And, if the former, do you know that tax laws encouraging prudential diversification require you hold no more than 5%? So, why would be surprising or unusual? Is it different for any other major tech stock?
Around 70% of APPL stock is held by such funds
Is that any different from that for any large tech company? In what way is Apple different? Care to tell me what the % institutional holding for Microsoft is? Or Intel? Or HP? Or Dell?
.... around 25% or more is going to be members of the Apple board, .......
This one statistic alone gives away the fact that you are an utterly clueless bloke, blowing smoke. Care to provide a cite?
....with probably only a couple of percent held by people like you and I.
'Me.' (Wording issues aside, care to provide a cite to the actual data)?
.....
Please stop already with your utterly inane, unsubstantiated, overblown, under-cited assertions.
The first problem is, you'd have an awfully difficult time predicting when this will occur, so it's fundamentally a predictor of nothing. Second, market cap isn't really a measure of anything but investor sentiment at any given moment in time. Not much more than six months ago, Apple's market cap was half of what it is today, so by that measurement, Apple has doubled in size in just the last few months. Of course we know that isn't really true -- market cap all about valuations, it has little directly to do with profits.
So even by this arbitrary rule, and a meaningful measurement, what Apple has accomplished in terms of EPS growth over the last ten years has to be considered something akin to a mathematical impossibility. But it happened.
What does tell you about the future? Absolutely nothing.
You may wish to mull over thus basic truism in finance: The value of a share is simply the sum, from today to some (fairly far away) future point in time, of a set of expected future cash flows to equityholders discounted back to the present at an appropriate cost of equity. Period.
When you make a statement such as "Of course we know that isn't really true -- market cap all about valuations, it has little directly to do with profits..." it betrays to me that you have trouble with some basic concepts in finance. If you'd like me to back up what I am saying, I could give you, for starters, say, a half-dozen cites. And, they would be no more than basic, well-known, widely-accepted, finance textbooks. (And if you really push me, I'd like to give you the actual Chapter cites too, but that would have to be tomorrow - I am going to turn in after this post.... yawn...)
And, fwiw, Apple's 'EPS growth' this past decade is not a mathematical impossibility. Far from it. Quite apart from the fact that 'EPS' confounds two metrics (E and #S), there are dozens of companies that have done what Apple did.
It's the law of large numbers. Apple's market cap is so large that it is impossible to grow at past high rates. The tablet will probably be a big hit and iPhone will take more market share than sj dreamed of a few years ago but I think the stock will languish.
The desktop and laptop market is dead as a growth engine. Even Microsoft saw that years ago.
After the recession is over, Apple's growth levels will increase substantially. Even over the next 12 months it will move upwards. It's already started to in a small way this last quarter. iPod sales drops are attributed to factors that include the recession, but also the fast growth of iPhones.
One thing I've wondered about Apple (and about Microsoft and Google, for that matter)... with the power of all of those brilliant engineers and programmers working for them, how is it that they have never managed to create their own stock trading programs to challenge the computing firepower of a Goldman Sachs, for example? It's like they are only using a tiny percentage of their brains!
We don't know what they're doing. But at the conference, they said that their investment policy at this time is directed towards conserving their cash. Translate to mean "protecting our investments in a difficult time for investments".
Some other companies with large cash and investment holdings have announced some losses there. Apple's done very well.
I don't know about Google, but I believe that MS did say their holdings had taken a hit.
I also think that these companies are smarter than Goldman and the rest. Goldman hs done ok because of the governments actions right now. Though, at this time, they're denying that they ever said they were in big trouble, even though it's a matter of record.
Interesting article in the Times about that the other day.
The logic makes my brain hurt.
What does "market cap" have to do with earnings growth potential?
Answer: Not one damned thing.
I think what he's saying that when a company gets very large, it's difficult to continue the same growth rates it had when it was smaller. I don't think he was meaning "earnings growth potential".
I didn't get that he was talking about "market cap" but rather growth of sales.
He'll have to come back and explain.
You may wish to mull over thus basic truism in finance: The value of a share is simply the sum, from today to some (fairly far away) future point in time, of a set of expected future cash flows to equityholders discounted back to the present at an appropriate cost of equity. Period.
Yes, and if you'd read all the words I wrote...
When you make a statement such as "Of course we know that isn't really true -- market cap all about valuations, it has little directly to do with profits..." it betrays to me that you have trouble with some basic concepts in finance. If you'd like me to back up what I am saying, I could give you, for starters, say, a half-dozen cites. And, they would be no more than basic, well-known, widely-accepted, finance textbooks. (And if you really push me, I'd like to give you the actual Chapter cites too, but that would have to be tomorrow - I am going to turn in after this post.... yawn...)
So Apple doubled in size during the last six months? Is that what you are really trying to tell me?
And, fwiw, Apple's 'EPS growth' this past decade is not a mathematical impossibility. Far from it. Quite apart from the fact that 'EPS' confounds two metrics (E and #S), there are dozens of companies that have done what Apple did.
I know that's what Apple did. That was precisely my point. There isn't any rule on heaven or earth that says it can't continue. Will it? I have no idea. It's the people claim to know, based on some arbitrary concept, that I have a quarrel with. You could easily have applied that same concept to Apple three years ago, after all the iPod driven growth was beginning to level off, and you'd have been dead wrong.
Apple isn't mining bauxite, they make consumer products. If they continue to pull rabbits out of their hats by making new products people really want, then the rule does not apply. Period.
I think what he's saying that when a company gets very large, it's difficult to continue the same growth rates it had when it was smaller. I don't think he was meaning "earnings growth potential".
I didn't get that he was talking about "market cap" but rather growth of sales.
He'll have to come back and explain.
I refer back to:
Apple's market cap is so large that it is impossible to grow at past high rates.
Market cap. Impossible. I can't agree with either the method of measurement, or the conclusion.
First of all, it's earnings that matter, not market cap. Second, Apple can indeed continue to grow earnings at recent-past rates. Is it going to be easy? No. Has it been easy? No, it might only look that way. The last two big spurts of growth were driven by different products, both huge hits. If they're going to continue growing at the past rate, they'll need an Act Three. I won't even begin to pretend to know whether it will happen, because in all honestly, I didn't predict the first two acts, and I never met anyone who did,
I refer back to:
Market cap. Impossible. I can't agree with either the method of measurement, or the conclusion.
First of all, it's earnings that matter, not market cap. Second, Apple can indeed continue to grow earnings at recent-past rates. Is it going to be easy? No. Has it been easy? No, it might only look that way. The last two big spurts of growth were driven by different products, both huge hits. If they're going to continue growing at the past rate, they'll need an Act Three. I won't even begin to pretend to know whether it will happen, because in all honestly, I didn't predict the first two acts, and I never met anyone who did,
You're right. Even though he said it, I didn't catch it.
I agree with what you say on that. Somehow, I thought he was saying that the companies growth would have to slow down.
Just goes to show that when you expect something, you see it. It wouldn't occur to me that someone would say that.
You understand the difference between realized and unrealized PnL right? Until you sell, it's unrealized and (heaven forbid) if Apple were to get themselves into trouble for any bizzare reason, your investment might suddenly deliver nothing. Sure, with Apple that's exceptionally unlikely given the current market and their cash reserves, but not entirely unprecedented. You could have bought APPL in 1987 at $13, you' have only just broken even in 2004. An investment of $10,000 even with a 0.02 yield (reinvested) on the other hand, would have netted the investor $5,000 profit in the same period, meaning the share price would need to collapse to half its value to suffer an actual loss.
Many day traders are tying to ride APPL up and down, making buy-and-hold investments risky, because small time investors never know when they may actually need that cash and be forced to sell. A dividend always means you can ride a small price drop and still come out on top in the medium term.
Before telling someone out and out that they're wrong, you might want to find out what they do for a living. Drop me a PM and I'll tell you.
Not right.
Edit- Added Comment-
If you had bought $10,000 of AAPL at $52 in Jan. of 1987 you would have about 200 shares in 1987. 400 shares in the middle of 1987. 800 shares in the middle of 2000. And 1600 shares in the beginning of 2005. Today, those 1600 shares of AAPL would be worth about $264,000. Your base price per share would be $6.50. Apple has $28 per share in cash alone.
It's the law of large numbers. Apple's market cap is so large that it is impossible to grow at past high rates. The tablet will probably be a big hit and iPhone will take more market share than sj dreamed of a few years ago but I think the stock will languish.
The desktop and laptop market is dead as a growth engine. Even Microsoft saw that years ago.
Apple ability to grow has nothing to do with the size of it's market cap. The growth rate is already factored into the market cap. The more growth anticipated, the higher the share price, the larger the market cap. It's not the other way around. Market cap do not determine the growth rate.
But Apple ability to grow has everything to do with their penetration into the market they're in. Right now Apple has less than 4% of the World computer market. Less than 2% of the cell phone market. Digital downloaded music just taking off and Apple stands to will get the lion share of that. Downloaded video is just taking off but still up for grabs. The only market that Apple may be saturated in is the MP3 player market. But who knows what market Apple will enter or create next. Apple large market cap is not a hinderance when you consider this.
Dell on the other hand has a market cap about 1/6 of Apple. But Dell has over 20% of the World computer market. Dell's small market cap is not going to help Dell grow at a faster rate than Apple. It will almost be impossible for Dell to just gain 50% more of the World computer market share. Where as it's very possible that Apple can double it's World computer market share.
Microsoft has a market cap that is only 25% larger than Apple. But Microsoft has 90% of OS market and over 80% of the office suite. The two biggest money maker for Microsoft. Microsoft doesn't stand a chance of growing as fast as Apple unless it enters another market that it can succeed in. It's not Microsoft market cap that hinders it growth. But the fact that Microsoft already saturated the market where it's making the most money in.
After the recession is over, Apple's growth levels will increase substantially. Even over the next 12 months it will move upwards. It's already started to in a small way this last quarter. iPod sales drops are attributed to factors that include the recession, but also the fast growth of iPhones.
everyone has an iphone. at least it seems like at least half the people on the NYC subway have an ipod or an iphone. the big growth is over. i remember back in 2003 i'd see one ipod a week.
and most of us iphone owners are going to stay with Windows until Apple comes down from it's ridiculous pricing or puts more horsepower into it's computers.
You made some pretty quick and big assumptions about me, and you know noting about me. Why should I assume that what you say means anything to my well used methods?
Fair enough, I could say the same is true but as the new guy here, the onus is on me to earn your trust, not the other way around. Apologies.
And now that programmed trades are 90% of the business, it's a problem. humans simply can't interact quickly enough when problems occur from this, and if you are in the business you know very well about the instances that have occured. This will happen more often, and the problems will escalate.
I agree with your whole post here, but what I would say is that these machines are not really capable of driving trends over a sustained period of time, or even following them. A machine won't be able to tell the difference between a rumor and a fact for example (say about Mr Jobs), they're much more concerned about eeking out pennies and cents in the tiny second by second fluctuations in the market. (I am referring specifically to HFT computers, not programs that wait for the price to drop to $20 before buying 10,000 lots, which have been around since the 1980's).
Now of course you could ask what social benefit this brings to the world (answer is none) or how listed companies benefit (they don't), or even how investors benefit (fine if you bought Goldman Sachs in January) but I don't see real traders being replaced by these things in the forseeable future; in fact, they're usually run by traders anyway.
Y
So Apple doubled in size during the last six months? Is that what you are really trying to tell me?
Good point. I interpreted the original Al Bundy reference to 'market cap' being the intrinsic value represented by the sum of all expected discounted future cash flows. (The reason that Apple -- and hundreds of other stocks -- fell across-the-board was because market risk premia went up substantially during the financial crisis. It would seem that risk premia have returned closer to historical levels.)
One could argue that Apple was undervaled at $75 (or whatever the low was) a few months ago (and those of us who thought that bought
All that said, will I sell my AAPL at the current price? Definitely not. Do I expect it to go higher? Definitely yes. But do I expect the stock to increase in value by 10X in the next 5 years like it did the past five? No, since that would require AAPL to trade at $1600 and the company's market cap to be $1.5 trillion. I think that is all that Al Bundy was saying.
What is a 'safe heaven' [sic] for large institutional investors? Care to explain? And in what way is Apple a safe haven? How does mark-to-market accounting 'benefit' from stability? Surely, that depends on whether the market is rising or falling? And, in what way is Apple a 'stable' tech stock? Using what metric/benchmark? And, what is the connection between stability in tech and non-dividend payments?
Oops, heaven wasn't a clever metaphor it was a typo.
Because any portfolio will contain securities that move up and down contrary to each other or have offset cycles; basic materials, manufacturing, commodities, retail sales etc. Not sure what you're asking here, it seems rhetorical.
What is a stock that 'swills around?' What is a 'moderately large mutual fund?' 2-3% of AAPL, meaning 2-3% of their fund, or 2-3% of AAPL? And, if the former, do you know that tax laws encouraging prudential diversification require you hold no more than 5%? So, why would be surprising or unusual? Is it different for any other major tech stock?
Swills around is a poor metaphor, but really, was it worth pointing out?
I meant 2-3% of their fund, and I was also pointing out this is a large amount, not a small amount, so your comment about diversification wasn't necessary. We're not talking about other tech companies, although it would be similar for other large cap tech stocks.
This one statistic alone gives away the fact that you are an utterly clueless bloke, blowing smoke. Care to provide a cite?
70% of the stock is instutionally owned, a simple google search will show that. This isn't wikipedia or 10th grade so I didn't think I needed to cite that, but I'll make an effort to back up wild stats in future and not post exhaggerations for dramatic effect, which is what I did. I rushed my post to be honest, the 25%, I pulled out of my arse.
So, there are 17 members of the board, assuming 30,000 chares each, plus 10,000 purchased (we know Eric didn't take this up, so it's probably a wrong assumption anyway) is around half a million shares - there are 895 million shares on the market, so at most the board would have 0.57% of the shares.
'Me.' (Wording issues aside, care to provide a cite to the actual data)?
Actually 'you and I' is perfectly acceptable in written English, particularly British English, although my wife (who's a journalist) pulls me up on this all the time, so she shares your opinion. When people point things like this out on forums though, it's somewhat inimical.
This is another post that just says nothing.
Let's put it this way. Announcing a product or NOT announcing a product will affect the company's stock outlook. What do you think of those apples.
well what the comment about Verizon shows is that this guy isn't really thinking. I know he's all "Apple would increase their user base cause so many folks didn't want to switch to get the iphone cause they like Verizon, etc"
but what he disregards is that Verizon is using a totally different flavor of phone tech. to create a device for Verizon would require Apple to re-invent the wheel to a serious degree. Also you can bet that Verizon would want an exclusive and we know the flack that Apple is getting on the phone.
I for one can't see it. it isn't logical from a technological point of view and from a legal one I would not be shocked if ATT got it worded in their contract that ANY device that had built in cell data capabilities was exclusive to ATT for the length of the contract. It would be idiotic to have otherwise. So from both views, it makes more sense that any new (non iphone) devices will be held until the contract is over. perhaps with a wifi only first gen and then a wifi/cell second gen. and anything coming out would be set up with Apple's choice of tech (being GSM then into the next gen of specs) but unlocked to work with any company that can handle it. same as further iphone versions at that point.
No, the Back To School selling season has already begun. Something that Apple needs to be taken to task over, IMO.
I disagree. the only flaw they have had is refreshing the laptops 4-5 weeks after that period. this year they did better by doing it a month into the 'season' when they had not yet had the large flow of sales, which was better. a refresh to officially kick off the season would be best, imo.
but a computer is not something you can buy, turn on and be comfortable with in one night. students need at least a couple of weeks go get really going, make sure they have all the software they need, get the right details from IT for their email etc.
the only flaw left is that it doesn't work for high school students. I think if Apple would to open it up to that group they would be in business. cause many schools are asking and a few are requiring access to a home computer and/or laptop. at least in larger cities.
There ARE retail selling seasons that they simply do not take advantage of, and that is simply bad business.
the business retail season is still "Christmas" and Apple definitely works around that period as much as they can.
And since the hummingbirds are all over the notion of some kind of iTablet about to make it's debut, it would be too late for back to school. That is all.
that presumes that the iTablet would be a device marketed to and even useful to students. the dominate theory is that it will be a 'netbook' in the truest since. a device for doing net activities (email, aim, web browsing) with perhaps itunes added in. in other words, a giant iphone/touch (running that software) NOT a full on notebook. which is what is more useful to students.
Microsoft has a market cap that is only 25% larger than Apple. But Microsoft has 90% of OS market and over 80% of the office suite. The two biggest money maker for Microsoft. Microsoft doesn't stand a chance of growing as fast as Apple unless it enters another market that it can succeed in. It's not Microsoft market cap that hinders it growth. But the fact that Microsoft already saturated the market where it's making the most money in.
This is the crux of the matter, IMO. Apple has successfully found and exploited new markets for driving growth, instead of trying to squeeze more out of the markets they were already in. This is the single, largest difference between Apple and Microsoft, and the reason why Apple has been experiencing explosive growth and Microsoft has not.
Good point. I interpreted the original Al Bundy reference to 'market cap' being the intrinsic value represented by the sum of all expected discounted future cash flows. (The reason that Apple -- and hundreds of other stocks -- fell across-the-board was because market risk premia went up substantially during the financial crisis. It would seem that risk premia have returned closer to historical levels.)
I try to respond to what people actually write, just as I hope others will do for me.
One could argue that Apple was undervaled at $75 (or whatever the low was) a few months ago (and those of us who thought that bought
Markets decide valuations on a daily basis, that's what they are for. These valuations are predicated on the greed-fear continuum, with actual profits often overlooked on both ends of the scale. Profits do come into play at some point, but we can't expect stock valuations to be logically attached to earnings over the short term.
All that said, will I sell my AAPL at the current price? Definitely not. Do I expect it to go higher? Definitely yes. But do I expect the stock to increase in value by 10X in the next 5 years like it did the past five? No, since that would require AAPL to trade at $1600 and the company's market cap to be $1.5 trillion. I think that is all that Al Bundy was saying.
Or more to the point, they'd have to grow earnings to something like $50/share from the current $5-6/share. Likely? No, but then, neither was the run they've had. A couple more huge hit products in new markets, and they could do it.
everyone has an iphone. at least it seems like at least half the people on the NYC subway have an ipod or an iphone. the big growth is over. i remember back in 2003 i'd see one ipod a week.
and most of us iphone owners are going to stay with Windows until Apple comes down from it's ridiculous pricing or puts more horsepower into it's computers.
That's by no means true.
Apple's iPhone sales are expected to rise considerably, as are the sales of the Touch.
Apple's computer sales will rise much faster again. That's already begun in a smaller way
Apple's software sales have also done well.
I agree with your whole post here, but what I would say is that these machines are not really capable of driving trends over a sustained period of time, or even following them. A machine won't be able to tell the difference between a rumor and a fact for example (say about Mr Jobs), they're much more concerned about eeking out pennies and cents in the tiny second by second fluctuations in the market. (I am referring specifically to HFT computers, not programs that wait for the price to drop to $20 before buying 10,000 lots, which have been around since the 1980's).
It isn't the long term trading that's a problem with this. It's the millions of trdes that are done in one second that are the problem. It's a positive feedback loop. In just a couple of minutes, entire sections of the market can collapse. The intent is to make these programs handle more and more of the trading, in more areas. By the time someone notices what's going on, and that may just take 30 seconds, the problem is already too big. By the time they can send the messages across to those who can actually do something, its another minute or two. By that time, the entire system could have come crashing down.
It's naive of those who are promoting these systems to think that they work well when they don't. They can't deal with sudden hiccups. That's why many in the industry are so concerned. But the problem is that trading is about one thing only, making money for those involved, no matter what the cost to the economy as a whole, or anything else for that matter.
Just like what we're going through with Bank of America and the bonus situation. Same thing with what's his name at Citigroup who is getting that $100 million bonus.
That's the big problem here. This should be slowed down until someone actually understands it, because it's obvious that no one designing and using these systems does.
Now of course you could ask what social benefit this brings to the world (answer is none) or how listed companies benefit (they don't), or even how investors benefit (fine if you bought Goldman Sachs in January) but I don't see real traders being replaced by these things in the forseeable future; in fact, they're usually run by traders anyway.
Well, with 90% of the trades being done without the intervention of traders, I can't agree with that last.
There are so many trades being done these days, that it may seem as though much of it is being done through traders, but it isn't.
I remember when I was in elementary school in the late 1950's that trade numbers on the NYSE were about 1.5 million a day. Look at what's happened since then. Most of this is due to computers, first manually, and now, automatically.
everyone has an iphone. at least it seems like at least half the people on the NYC subway have an ipod or an iphone. the big growth is over. i remember back in 2003 i'd see one ipod a week.
and most of us iphone owners are going to stay with Windows until Apple comes down from it's ridiculous pricing or puts more horsepower into it's computers.
Everyone does not have an iPhone. Consider all the other carriers people refuse to switch from and you see additional potential for growth. Consider all of the potential growth through China Unicom, and you can imagine even more growth. There is still a lot of growing left for iPhone.
I remember when I was in elementary school in the late 1950's that trade numbers on the NYSE were about 1.5 million a day. Look at what's happened since then. Most of this is due to computers, first manually, and now, automatically.
Also, a lot more shares to be traded, and a lot more traders to trade them. Anyway, what all of this automatic electronic trading really does (or so it seems to me) is exaggerate the tendency for the markets to move on momentum. Often stocks go up for no other reason than they are going up, and down because they are going down. It's the pile-on effect. In theory this all cancels out in the long run, but the run can be pretty long sometimes.