Warren Buffett says Apple should buy back stock & build value, ignore Einhorn

Posted:
in AAPL Investors edited January 2014
Berkshire Hathaway chief and respected investor Warren Buffet believes Apple should use its cash pile to buy back more stock while it's at a depressed value, comparing it to buying dollar bills for 80 cents.

Buffett


Apple Chief Executive Tim Cook should work on building his company's value, rather than worrying about pushing the stock price up on a daily basis, Buffett said in an appearance on CNBC's "Squawk Box" on Monday, as summarized by Apple 2.0. Buffett commented on Apple as part of a three-hour appearance on the program.

The Berkshire CEO admitted that he talked with late Apple co-founder Steve Jobs about what Apple could do with its cash. He believes the best use of Apple's $137-billion-and-growing cash pile is to buy back stock at a reduced price.

"If you could buy dollar bills for 80 cents, it's a very good thing to do," Buffett said.

Beyond that, he believes Apple's best strategy is to simply run its business well. If Cook can continue to do that, Buffett believes shares of AAPL will respond accordingly.

As for hedge fund manager David Einhorn's push for Apple to offer "iPref" preferred shares, Buffett believes the best thing for Cook and Apple to do is ignore it. He noted that his own Berkshire has lost 50 percent of its stock price four times in its history.

"When that happens, if you've got money, you buy it," he said. "You just keep working on building the value."

And while he admitted Apple may have "too much" cash, he said one reason for that could be the fact that Apple has not yet been taxed on two-thirds of it, which is kept overseas.

While Buffett doesn't own shares of Apple, he has been positive on the company's outlook for some time. In an interview back in 2010, Buffett said he believed Jobs had done a "terrific job" at the helm of Apple.

Apple and Berkshire Hathaway also shared the spotlight last week, when both companies appeared in the top 10 on Fortune's "Most Admired" list of companies. Apple took the top spot on the annual list, while Berskhire came in 8th.
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Comments

  • Reply 1 of 57
    MacProMacPro Posts: 18,155member
    Well whatever Apple do I just hope, sooner rather than later, we see AAPL start going up again ... please ... pretty please!
  • Reply 2 of 57
    lightknightlightknight Posts: 2,312member
    My hero :D
  • Reply 3 of 57
    anantksundaramanantksundaram Posts: 19,061member
    Duh. No-brainer.

    Some of us have been saying this for a while.
  • Reply 4 of 57
    lightknightlightknight Posts: 2,312member

    Quote:

    Originally Posted by anantksundaram View Post



    Duh. No-brainer.



    Some of us have been saying this for a while.




    The point is, if YOU say it, nobody cares*. If HE says it, Einhorn can go f... himself.


     


     


    *Not said in an unfriendly way, just from a standard stockholder perspective, you're nobody to them, he is a God of Stock.

  • Reply 5 of 57
    maestro64maestro64 Posts: 4,481member
    About time some common sense, but Wall Street will not listen to someone who knows how to make money the old fashion way, which is to work hard at it over a long time and invest in things that create value.
  • Reply 6 of 57
    rogifanrogifan Posts: 10,669member

    Quote:

    Originally Posted by anantksundaram View Post



    Duh. No-brainer.



    Some of us have been saying this for a while.


    I'd prefer this over some of the silly stuff we hear like Apple should buy Twitter, Netflix or Tesla.

  • Reply 7 of 57
    rcoleman1rcoleman1 Posts: 153member
    Anyway you look at it Apple is like a rollercoaster...with screams, yells, ups and downs...in a good way.
  • Reply 8 of 57
    crowleycrowley Posts: 5,779member
    That's an analyst I respect.
  • Reply 9 of 57
    bdkennedy1bdkennedy1 Posts: 1,459member


    I don't get where all of this advice for Apple is coming from. Apple never listens to analysts.

  • Reply 10 of 57
    boriscletoboriscleto Posts: 159member
    US Banks have been buying dollar bills for $.97 for years. The CEOs think they are so smart they give themselves huge bonuses.
  • Reply 11 of 57
    charlitunacharlituna Posts: 7,205member

    Quote:

    Originally Posted by digitalclips View Post



    Well whatever Apple do I just hope, sooner rather than later, we see AAPL start going up again ... please ... pretty please!


     


    The real trouble isn't what Apple is or isn't doing. It's the analysts etc. they are the ones spreading reports like Apple cut orders on screens for iPads which just mean they aren't selling well. When the truth could be that they are selling like crazy but Apple was having to buy twice as many screens to make sure they had enough of their quality standard to fill the orders and now the supplier has their game together and this isn't an issue anymore so why buy tons of surplus.


     


    Analysts are also the ones saying Apple will release this or that and when it turns out to be wrong they scream delay so they can still look like they knew what they were talking about when they didn't. Or way over inflating what they think sales of something will be and screaming failure their crazy numbers aren't met.


     


    until these games are forced to an end, what Apple does won't be the key to their stock value 

  • Reply 12 of 57
    MacProMacPro Posts: 18,155member
    charlituna wrote: »
    The real trouble isn't what Apple is or isn't doing. It's the analysts etc. they are the ones spreading reports like Apple cut orders on screens for iPads which just mean they aren't selling well. When the truth could be that they are selling like crazy but Apple was having to buy twice as many screens to make sure they had enough of their quality standard to fill the orders and now the supplier has their game together and this isn't an issue anymore so why buy tons of surplus.

    Analysts are also the ones saying Apple will release this or that and when it turns out to be wrong they scream delay so they can still look like they knew what they were talking about when they didn't. Or way over inflating what they think sales of something will be and screaming failure their crazy numbers aren't met.

    until these games are forced to an end, what Apple does won't be the key to their stock value 

    Agreed.
  • Reply 13 of 57
    rogifanrogifan Posts: 10,669member


    And the stock is down another $6 so far today. I don't get what's causing these 1-2% drops seemingly every day.  At what point does it get low enough where it becomes a steal and people start buying again? 

  • Reply 14 of 57
    dmarcootdmarcoot Posts: 191member
    Finally a voice of sanity.
  • Reply 15 of 57
    charlitunacharlituna Posts: 7,205member

    Quote:

    Originally Posted by bdkennedy1 View Post


    I don't get where all of this advice for Apple is coming from. Apple never listens to analysts.



     


    True. While the phrasing was advice to Apple, I think the real intended audience were investors. Buffet is smart enough to know that Apple is likely to do as he said and was likely always going to. But the common investor isn't necessarily going to see that. They generally do trust Buffet cause he's basically an investment god. So he says it and that its a good thing, they will trust that Apple will listen and so should they. 


     


    With someone like Buffet backing up the company hopefully the bled off of value will slow, if not stop sooner rather than later.

  • Reply 16 of 57


    Warren Buffet is consistently a voice of logic and reason.  From investing in general, to taxes, to Apple, he is right on about what needs to be done.


     


    As Buffet said, Apple stock is a great value and buying their stock is a great opportunity for any person or entity that has a surplus of cash with a long investment time horizon including the company itself.


     


    The market can stay irrational for long periods of time, but those who stand firm through them often reap the best rewards.

  • Reply 17 of 57
    tbelltbell Posts: 3,146member

    Quote:

    Originally Posted by charlituna View Post


     


    The real trouble isn't what Apple is or isn't doing. It's the analysts etc. they are the ones spreading reports like Apple cut orders on screens for iPads which just mean they aren't selling well. When the truth could be that they are selling like crazy but Apple was having to buy twice as many screens to make sure they had enough of their quality standard to fill the orders and now the supplier has their game together and this isn't an issue anymore so why buy tons of surplus.


     


    Analysts are also the ones saying Apple will release this or that and when it turns out to be wrong they scream delay so they can still look like they knew what they were talking about when they didn't. Or way over inflating what they think sales of something will be and screaming failure their crazy numbers aren't met.


     


    until these games are forced to an end, what Apple does won't be the key to their stock value 



     


     


    It is more sinister than that. It is hedge fund managers leaking faulty rumors to sink the stock. 

  • Reply 18 of 57


    wouldn't that be nuts?? Apple stops releasing products so the stock tanks due to "lack of innovation". once their market cap sinks below 200 billion, they buy all the shares with their cash hoard, go private, and release all the products they've been keeping from us.


     


    /conspiracy

  • Reply 19 of 57
    tkell31tkell31 Posts: 216member


    It was about this time of year last year when Cook dumped all his shares.  I believe he and other executives are being granted more huge allotments this year and in 2015.  Curious to see if they hold at this price or sell.


     


    Share buybacks really favor sellers of the stock.  For people holding the stock a dividend increase would be much better and would go much further in demonstrating long term confidence in the company.


     


    Bottom line if you believe in the company long term this is a nice chance to add shares at close to a 40% discount from the high (wow, that is a big drop), and if not what does it matter what they do?

  • Reply 20 of 57
    Yes.
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