Carl Icahn calls Apple a 'no brainer' investment as his stake grows to over $3B

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Comments

  • Reply 21 of 85
    MarvinMarvin Posts: 15,273moderator
    sog35 wrote: »
    He took decades to acquire the capital to make such an investment.  He spent decades working 365 days a year 15 hours a day.  The dude is a self made BILLIONAIRE.  He worked damn hard for his money.

    Not exactly:

    http://www.crn.com/slide-shows/mobility/240158732/8-snapshots-of-carl-icahn-takeovers.htm?pgno=8
    http://www.streetauthority.com/investing-basics/how-invest-carl-icahn-477322

    "The leveraged buyout was one of the great financial inventions of the 1980s. Buying companies with little money down and stuffing them with debt before exiting with a massive gain turned millionaires into billionaires and forever changed the rules on the Street.

    Icahn's reputation as a ruthless corporate raider was born in 1985 after his hostile takeover of TWA, a struggling airline company. Icahn was able to extract close to a $1 billion profit from the deal with little capital. After executing a hostile takeover and selling TWA assets to pay back the loans he used to buy the company in the first place, Icahn then took TWA private in 1988 for a profit of more than $465 million in less than three years. Three years later, Icahn sold TWA's lucrative London routes to American Airlines for $445 million."

    Taking over a company using debt, stripping out the assets to repay himself via a stock buyback and leaving the company in bankruptcy is not what I'd call working damn hard. That left the company worthless and tens of thousands of people who did work hard out of a job.
    sog35 wrote: »
    Without investors Steve Jobs himself would not be able to change the world.  Most companies need outside $$$ to start.

    Which is exactly one of the problems with social mobility. Why do you make out like this is a good thing? If it wasn't for Steve and his money, Pixar wouldn't have happened either. It shouldn't require the preferences of rich people to decide which good ideas take off and which don't, they should stand on their own merit.
  • Reply 22 of 85
    Quote:
    Originally Posted by sog35 View Post

     

     

    My point is Steve Jobs needed investors at THE VERY BEGINNING.


     

    In the 70's, most investors actually wanted the thing they invested in to succeed. By the late 80's, it was just about bleeding everything dry. Not all investors, obviously, but Icahn pretty much invented Vulture Capitalism. He's an anathema to creativity and growth - for him, Apple is a just a big juicy bag of blood to be drained dry.

  • Reply 23 of 85
    dasanman69dasanman69 Posts: 13,002member
    sog35 wrote: »
    Dividends are NOT FREE money.

    Would you be happy with your paycheck got taxed TWICE?  That's whats happening when you receive dividends.  First Apple pay taxes on their earnings.  Then they distribute their earnings as dividends.  Now the investors have to pay taxes AGAIN on the dividends.

    A buyback gives each shareholder a larger ownership stake in the company and does not cause a taxable event. 

    I have to work to get a paycheck, and helped the company I work for earn revenue which they pay taxes on and then I have to pay tax. A dividend is given to someone who did nothing but take a risk by investing. They didn’t lift a finger to help that company earn, so yes it is indeed free money.
  • Reply 24 of 85
    damonfdamonf Posts: 229member
    Quote:
    Originally Posted by sog35 View Post

    $150,000,000,000 cash

    x 25% (average of S&P, Dow, and Nasdaq index)

     

    = $37,500,000,000

     

    Thats how much Apple lost from opportunity cost for having its cash in 1% accounts

     

    $150,000,000,000 cash

    x 35% (amount Apple is up from 6 month bottom of $385)

     

    = $52,500,000,000

     

    Thats how much Apple lost from opportunity cost because they did not buyback at $385

     

    Of course they could not do what is stated above.  But it just illustrates the massive amounts of possible money Apple is losing for itself and its investors because the cash is doing nothing.

     

    You aren't taking into consideration the U.S. federal income tax that Apple would have to pay to bring it's money back onto U.S. soil to purchase its own shares. Apple is holding the vast majority of its cash overseas for that reason.

    Stock repurchase also doesn't guarantee that Apple's stock goes up and stays up. If Apple has a bad quarter, for whatever reason, the stock would go down. Then those of us not in favor of more buybacks would come out of the woodworks saying that Apple wasted its money on repurchasing the stock in the $550 range if it were to fall $100/share, back to $450. Apple has to "buy low" just like the rest of us, but can't if it's in a locked-in "must spend $xxx billion in y years" program.

    Dividend payments, on the other hand, are more consistent and reliable, and reward long-term shareholders every quarter for holding onto the stock, rather than those who just want to "pump and dump" it like Carl Icahn.
  • Reply 25 of 85
    clemynxclemynx Posts: 1,552member
    Is he referring to himself as 'we'?
  • Reply 26 of 85
    Carl's argument is the excess cash. But if Apple has good earnings on Monday, then the cash will not be a big issue, but if the earnings disappoint, it will be a different story. By the way who is in charge of managing the cash? I doubt that it is Tim Cook. It would seem that he does not have the background and time to manage it.
    And the Chairman of the board works full time for a Google company as CEO. The makeup of the board does not have anybody with much financial or investment background.
  • Reply 27 of 85
    dasanman69dasanman69 Posts: 13,002member
    sog35 wrote: »
    This is one of the stupidest things i've ever read in my life.

    Thats like saying the interest earned on your savings account is 'FREE MONEY'
    Or the growth in your 401k is 'FREE MONEY'
    So tax those TWICE. Ridiculous.

    Yes it is all free money. What's wrong with that term?
    Btw many things are taxed multiple times. Why aren’t you screaming bloody murder on paying sales tax with money you paid income tax on?
  • Reply 28 of 85
    dasanman69dasanman69 Posts: 13,002member
    sog35 wrote: »

    because buybacks avoid ALL TAXES and dividends don't.  You need to pay Corp taxes (Apple does), Corp state taxes (Apple does), Fed taxes (investor does), and State taxes (investor does).

    I'm not saying all dividends are bad.  Just highlighting one benefit of a buyback vs div

    I understand your point and agree, but given the choice between no dividend and a highly taxed one, I'll take the latter. Some money will always be better than no money.
  • Reply 29 of 85
    dasanman69dasanman69 Posts: 13,002member
    sog35 wrote: »
    John: Uncle I want to start my own business selling pizza's

    Uncle: Sounds like a good idea.

    John:  Could I borrow $100,000 from you for capital?  I'll give you 50% of the profits

    Uncle: Sure sounds good

    5 years latter

    Uncle: So John have you made any money with your Pizza business?

    John:  Yup. Big time bioch!  I made $500,000 last year!

    Uncle:  ............so where is my share?

    John:  FU mother buker.  I'm the one who lifted my finger.  YOu did jack sheet.  Here I'll give you $100.

    Uncle:  WTF I'm going to sue you!

    John:  FU.  You should be happy with the $100.  Its FREE MONEY. FREE MONEY. FREE MONEY............

    That's pretty funny, but not the point I'm trying to make.
  • Reply 30 of 85
    dasanman69dasanman69 Posts: 13,002member
    sog35 wrote: »
    Guess what?  Their are probably shareholders/partners that own the company you work for that don't lift a finger to help the company.  Yet you are allowing them to take the MAJORITY of the profits?  Why work for such a company!  Why not go at it on your own!  Why not start your own business!  Since its soooooooooooooooooooooooo easy!  You don't even need to lift a finger!  Then once you own the company and retire would you expect to be able to get profits out of the company?  Of course not!!! You are not lifting a finger anymore so you dont DESERVE any money from it!!!!  Its FREE MONEY! You should be happy to get 1 cent! 

    It's not my company, so how am I allowing anyone to take the majority of the profits? I do own stock and along with my wages I also get quarterly dividends.

    Nowhere did I say anything was easy. Starting a company is anything but, and FYI there are lots of retired people that own companies that are chugging along just fine and earning them some nice change.
  • Reply 31 of 85
    boeyc15boeyc15 Posts: 986member
    Quote:

    Originally Posted by sog35 View Post

     

    $150,000,000,000 cash

    x 25% (average of S&P, Dow, and Nasdaq index)

     

    = $37,500,000,000

     

    Thats how much Apple lost from opportunity cost for having its cash in 1% accounts

     

    $150,000,000,000 cash

    x 35% (amount Apple is up from 6 month bottom of $385)

     

    = $52,500,000,000

     

    Thats how much Apple lost from opportunity cost because they did not buyback at $385

     

    Of course they could not do what is stated above.  But it just illustrates the massive amounts of possible money Apple is losing for itself and its investors because the cash is doing nothing.


      Your 35% example is purely anecdotal(ie one data point) and totally misleading to future performance.

  • Reply 32 of 85
    newbeenewbee Posts: 2,055member
    Quote:
    Originally Posted by sog35 View Post

     

    Lets look at Carl's biggest investments in 2013 and their return:

     

    Forest Labs 95% return in 2013

    Chespeake Energy 30%

    Herbalife  125%

    Netflix  120%

     

    It cannot be denied.  The dude helps what ever stock he owns and pushes. 

     

    You guys always show hate for the guys manipulating the stock down.  Why do you hate on a guy who is manipulating it up?  Don't hate the player hate the game. 


    Unless you have access to all of his investments, it's not wise to base your opinion of him to just his "biggest 4 holdings". That's like the people who come back from Vegas bragging about their biggest wins .... but you never hear about their losses. Icahn's history is that of a person who will destroy companies (jobs, peoples lives, etc.) with absolutely no regard to all of the people who are harmed . He should be the poster boy for all that is wrong about today's "capitalism". Greed personified.

  • Reply 33 of 85
    dasanman69dasanman69 Posts: 13,002member
    sog35 wrote: »
    My point is those who contribute CAPITAL (buy stock) are very important to a company.  Just because they don't lift a finger in everyday operations does not mean they don't need to be compensated when the company is doing well.  Thus the dividends they receive are not FREE MONEY.  The dividends they receive is the RETURN on INVESTMENT.  They bear the risk of losing their entire investment unlike an employee who gets paid every pay period regardless of profit.

    Yes but the only one that made a capital contribution to the company was the initial investor, any subsequent investor money goes directly to the previous stockholder, and so on and so forth. Now a company will benefit directly when the price of their shares go up
  • Reply 34 of 85
    newbeenewbee Posts: 2,055member
    Quote:
    Originally Posted by sog35 View Post

     

    $150,000,000,000 cash

    x 25% (average of S&P, Dow, and Nasdaq index)

     

    = $37,500,000,000

     

    Thats how much Apple lost from opportunity cost for having its cash in 1% accounts

     

    $150,000,000,000 cash

    x 35% (amount Apple is up from 6 month bottom of $385)

     

    = $52,500,000,000

     

    Thats how much Apple lost from opportunity cost because they did not buyback at $385

     

    Of course they could not do what is stated above.  But it just illustrates the massive amounts of possible money Apple is losing for itself and its investors because the cash is doing nothing.


    I love the phrase "opportunity cost". Imagine if I had only bet the farm on the last 20 years of Super Bowl winners ... hell, I'd be a multi-millionair for sure. Just think of all that "opportunity cost" wasted. Shameful.

     

    Hint for sog35 :     "opportunity cost" is Wall Street Jargon designed to fool investors  ..(read suckers) .. into "proving" that the "expert" knows what he is talking about. It's called "baffling with bullshit". 

  • Reply 35 of 85
    tbelltbell Posts: 3,146member
    Quote:
    Originally Posted by sog35 View Post

     

     

    wrong.  Dividends force investors to pay higher taxes. 


     

    Read the Intelligent Investor. This is considered one of the definitive investing books of all time. Endorced by tons of people, including Buffet himself. The central premise is to look for stable companies with good management that pay out dividends. Apple is a stable company with good management with no debt that pays the largest dividend. 

     

    The tax differences you speak of depend on a lot of variables. For example, is your investment in a retirement account? If so, what kind, a Roth IRA or Traditional IRA? If you are selling stock, how long have you held on to the stock? So, to cite tax differences pretty much means little to many investors, myself included. 

     

    Further, buying back Apple's own stock is pretty much a waste of its money and undermines the longterm stability of the company. First, Carl wants Apple to spend all of its $150 billion of its cash buying back its own stock. Since, Apple would be retiring the stock after purchase, what does Apple obtain for the purchase? Nothing. This largely benefits short term investors, who arguably are not investors that Apple should be concerned about.  Second, Carl wants Apple to purchase its own stock on an expediated pace. This means Apple would be buying back its own stock that really does not benefit it at a premium. Further, Apple's cash is largely over seas, so to make the purchase it has to 1) bring its money back to the US and take a huge tax hit, or 2) take on debt to finance the purchase. Neither approach is responsible. 

     

    Apple rightfully is opposing the measure because Apple has always been a conservative company. From past experience, it knows the future is not predictable. Evaluating pay outs to inventors annually based on current finances is the way to go. Apple likely will recommend an increase in dividends, and a larger cash buyout that it already has, but far short of what Carl wants. That is responsible. 

  • Reply 36 of 85
    tbelltbell Posts: 3,146member
    Quote:
    Originally Posted by sog35 View Post

     

    $150,000,000,000 cash

    x 25% (average of S&P, Dow, and Nasdaq index)

     

    = $37,500,000,000

     

    Thats how much Apple lost from opportunity cost for having its cash in 1% accounts

     

    $150,000,000,000 cash

    x 35% (amount Apple is up from 6 month bottom of $385)

     

    = $52,500,000,000

     

    Thats how much Apple lost from opportunity cost because they did not buyback at $385

     

    Of course they could not do what is stated above.  But it just illustrates the massive amounts of possible money Apple is losing for itself and its investors because the cash is doing nothing.


     

    How is that relevant? Apple would be buying back the stock and retiring it. So if the stock goes up, Apple can not resell the stock. 

  • Reply 37 of 85
    gatorguygatorguy Posts: 24,094member
    tbell wrote: »
    How is that relevant? Apple would be buying back the stock and retiring it. So if the stock goes up, Apple can not resell the stock. 
    It doesn't have to be retired. I think they can resell it if they chose to. Has Apple stated any buybacks will absolutely be retired? As I understand the last round was but I didn't note whether they had to commit to that.
    http://www.investopedia.com/ask/answers/05/retiredstock.asp
  • Reply 38 of 85
    jungmarkjungmark Posts: 6,926member
    flabingo wrote: »
    Carl's argument is the excess cash. But if Apple has good earnings on Monday, then the cash will not be a big issue, but if the earnings disappoint, it will be a different story. By the way who is in charge of managing the cash? I doubt that it is Tim Cook. It would seem that he does not have the background and time to manage it.
    And the Chairman of the board works full time for a Google company as CEO. The makeup of the board does not have anybody with much financial or investment background.

    Apple does have a CFO and a controller.

    sog35 wrote: »
    WRONG.  If Apple listen to Ichan and others back in July they would have made 35% in share growth.  AND THATS A FACT.

    Past results do not guarantee future earnings. There is no Facts on WS.

    Fact Apple is already doing a buy back. I'm voting no.
  • Reply 39 of 85
    dasanman69dasanman69 Posts: 13,002member
    sog35 wrote: »
    So is dividends FREE MONEY or not?
    Yes or No.

    IS not dividends EARNED by the one who gets it?
    Yes or No.

    Has a long term Apple stockholder ever gotten a dividend before last year? They bought Apple as a growth stock not a dividend stock, so when Apple paid out a dividend for the first time it was money that stockholders were not expecting so I would consider that free money.
  • Reply 40 of 85
    newbeenewbee Posts: 2,055member
    Quote:

    Originally Posted by sog35 View Post

     

    Is Opportunity cost real. 

     

    So you are comparing investing with an index fund to betting on the Superbowl?  Man, your financial acumen is............


    #1 ...  "Opportunity cost" speaks only of past performance ... no one speaks of the "Opportunity cost" of a losing stock because that wouldn't support the "genius" of the analyst speaking ... professional or amateur. As they say, hind site is 20/20. Anyone can quote the past, but only fools try to guarantee the future.

     

    #2  On 1/23/07 iShares index fund closed at143.20 ... on 10/10/08 closed at 91.50 ... a decline of almost 40% and didn't return to that level until 09/06/12 (144.35).  5 ½ years of no gain, not even counting the devaluation of the $$. 

     

    So yeah, I'd say that the stock market and Vegas are very similar ... with only the speed of the game that is necessary to remove a lot of people of their money. Remember, any dollar won by someone is a dollar lost by someone else. There's gambling and investing and it is unwise to confuse the two. Financial "acumen" is to recognize the difference.

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