Apple's buybacks exploited stock dips to generate billions in shareholder value

135

Comments

  • Reply 41 of 99
    Quote:

    Originally Posted by jwdav View Post



    Buying back shares increases the earnings per share which will increase the value of the shares. Plus it saves Apple paying the dividend on those shares.

     

    Correct.  Basically if they earn the same 40B each year but cut the shares in half the EPS will double per share.  They also won't pay a dime to the retired shares.  

     

    Apple's weak buyback stance makes me constantly wonder if they are not as confident in their future as we would hope they are.  Not completely surprising when you look at the insider sells from top management and board members.  Most (almost all) have blown out all their stock or held just a few hundred shares upon their vesting. In other words nobody wanted to hold the stock the moment they were allowed to sell it.  It was like a hot potato.  If I were management and felt the future was very bright I'd hold a significant portion or at least half, wouldn't most people?

     

    I have to say I'm not a huge Icahn fan nor am I an anti-Icahn guy but I do respect his simple math and logic on the huge buyback.  It's sad that Calpers beat him down on this.  If a buyback ever made sense this was one of them. Even Buffett told Steve Jobs to use the cash to buyback shares.  Had Jobs listened the EPS today would be closer to $100/share and a PE of 10 would be a $1000/share stock.  

     

    Now if you don't think the future is that bright then management IS doing the right thing by holding tons of cash. Cash is the lifeblood of a corporation that is falling on hard times.  A small share count is not worth much if your company is shrinking fast or losing money (remember nokia and blackberry).  Maybe they think that cash might be necessary in the next 4 to 8 years and thus better to keep it then waste on repurchases I guess.  Only they know from their perch but this seems to be what Cook is telegraphing by his actions.

  • Reply 42 of 99
    mstonemstone Posts: 11,510member
    Quote:

    Originally Posted by Tallest Skil View Post

     
    Originally Posted by mstone View Post

    I read that some Chicago trading companies are actually using lasers to communicate to NJ in order to get around the latency issue with that distance using the Internet.


     

    Laser Trading

    Directed by Michael Bay

    Written by the CSI team

    Coming This Summer

     


    Wow, your reply is so clever I don't even get it. You must be a genius.

  • Reply 43 of 99
    dunksdunks Posts: 1,254member
    I'd love to see it mandatory that all company shares be held for a minimum period, say 24 hours or a week. In it's current form the market is just too manipulable. Day traders, and high speed trading systems on algorithms who start and end the day with no shareholdings produce nothing but pure profit (money pick-pocketed from others).
  • Reply 44 of 99
    dunksdunks Posts: 1,254member
    Quote:

    Originally Posted by mvigod View Post

     

     

     

    Yes I read it all.  The proposal from Icahn was NOT to use overseas cash.  It was to borrow at historically low interest rates which for apple would be sub 3%.  After they expense the interest it would be closer to 2% net interest or as close to free as they can ever get.  Why a no brainer?  Apple is earning 40/share on a market cap of 500B.  Take out the cash and it's under 400B.  This makes the earnings yield on the buyback over 8% net to apple.  Basically a number that if they flatline EPS for 9 years is a 100% return on the investment JUST FROM THE BUYBACK.  They would be paying back the loan out of cash flow and exceeding the interest rate by that 8%.

     

    This simple no brainer finance seems to be incomprehensible to the Apple management team and board.  Icahn is the only smart guy in the room.  It absolutely amazes me. This is not calculus folks.  Just simple grade school math.


     

    Maybe it's because Apple is in the industry of manufacturing computers and not manipulating their own share price through dubious financial arrangements.

  • Reply 45 of 99
    Originally Posted by mstone View Post

    Wow, your reply is so clever I don't even get it. You must be a genius.



    The idea of having to use lasers to circumvent fiber/copper latency issues just sounded like something that would be completely misconstrued in the public arena (CSI writing) and twisted into an action or thriller film by a hack director.

  • Reply 46 of 99

    After all the conspiracy theories about the investors and media manipulating the market, I'm surprised the conspiracies haven't turned towards the biggest beneficiary of the drop in price - Apple.  Apple was the manipulator!!  They were driving down the price so they could buy at the low point and ride the tide back up!!  Down with Apple!!

  • Reply 47 of 99

    Would have been smarter to take that 40 billion and buy Tesla, that's where the future tech is.  Elon would bring back some of the magic to Apple.  Cook is a good operations guy but Apple is missing the magic it had when Steve was at the helm.

  • Reply 48 of 99
    mstonemstone Posts: 11,510member
    Quote:
    Originally Posted by Tallest Skil View Post

     
    The idea of having to use lasers to circumvent fiber/copper latency issues just sounded like something that would be completely misconstrued in the public arena (CSI writing) and twisted into an action or thriller film by a hack director.


    Wow, you really do live in a distorted fantasy world. Next time just Google it. Oh right you are probably Google adverse.

  • Reply 49 of 99
    aaronjaaronj Posts: 1,595member
    Quote:

    Originally Posted by Tallest Skil View Post

     



    The idea of having to use lasers to circumvent fiber/copper latency issues just sounded like something that would be completely misconstrued in the public arena (CSI writing) and twisted into an action or thriller film by a hack director.


     

    I've said it before, dammit!  Do NOT diss Michael Bay!  "Armageddon," "Pearl Harbor," the "Transformers" trilogy?!  These are modern epics!

     

    :)

  • Reply 50 of 99
    Originally Posted by mstone View Post

    Wow, you really do live in a distorted fantasy world. Next time just Google it. Oh right you are probably Google adverse.

     

    What on Earth are you talking about?

     

    …the “Transformers" trilogy?!


     

    I happily watched (read: laughed at and mocked) the first three, and I’m looking forward to laughing at and mocking the 4th.

  • Reply 51 of 99
    aaronjaaronj Posts: 1,595member
    Quote:

    Originally Posted by Tallest Skil View Post

     

     

    I happily watched (read: laughed at and mocked) the first three, and I’m looking forward to laughing at and mocking the 4th.


     

    I hate to admit this, but I actually enjoyed the first one.  Or maybe I just enjoyed Megan Fox's completely flat abs covered in sweat. :)

     

    But I do have to say that I own the first one on BD. *hides* :)

  • Reply 52 of 99
    Quote:

    Originally Posted by AppleInsider View Post



    Apple's use of its own cash to buy back shares means that the additional $1.4 billion in value was lost by spooked sellers and effectively credited to the shareholders who remained invested in the company, as the value of the retired shares are absorbed by the remaining shares.



    In total, Apple has bought back more than $42 billion of its own shares over the past two years, retiring around 84.5 million shares, or nearly 9 percent of the total shares outstanding when it launched its repurchase program.

     

    Apple is retiring these shares? I thought they were just buying them back? 

  • Reply 53 of 99
    mstonemstone Posts: 11,510member
    Quote:

    Originally Posted by Tallest Skil View Post

     
    What on Earth are you talking about?


     


    No offense intended but I believe you are insane.

  • Reply 54 of 99
    aaronjaaronj Posts: 1,595member
    Quote:
    Originally Posted by mstone View Post

     

    No offense intended but I believe you are insane.


     

    You realize he was just making a joke right?

     

    ETA: I found it funny.  But then I find almost anything about Michael Bay pretty hilarious. :)

  • Reply 55 of 99
    hill60hill60 Posts: 6,992member
    mvigod wrote: »
    Looks like they should have listened to carl icahn and bought back 150B worth. If their tiny buyback was profitable they could have gained over 15B very quickly and retired an enormous amount of the float (almost 1/3 of it). Savings over the years from not paying out a dividend to 1/3 of the shares was an extra bonus. This as Icahn said was a no brainer. Apple just didn't have the confidence to go big. They may be missing a rare opportunity and already seem to possibly have missed the best chance they had. It may only get more expensive from here.

    While handing around fifty billion to the US government in tax?
  • Reply 56 of 99
    Originally Posted by mstone View Post

    No offense intended but I believe you are insane.

     

    You need to work on your humor. Not your sense–we’ll get to that later–just on your existence thereof.

  • Reply 57 of 99
    asdasdasdasd Posts: 5,681member
    mvigod wrote: »
    Correct.  Basically if they earn the same 40B each year but cut the shares in half the EPS will double per share.  They also won't pay a dime to the retired shares.  

    Apple's weak buyback stance makes me constantly wonder if they are not as confident in their future as we would hope they are.  Not completely surprising when you look at the insider sells from top management and board members.  Most (almost all) have blown out all their stock or held just a few hundred shares upon their vesting. In other words nobody wanted to hold the stock the moment they were allowed to sell it.  It was like a hot potato.  If I were management and felt the future was very bright I'd hold a significant portion or at least half, wouldn't most people?

    I have to say I'm not a huge Icahn fan nor am I an anti-Icahn guy but I do respect his simple math and logic on the huge buyback.  It's sad that Calpers beat him down on this.  If a buyback ever made sense this was one of them. Even Buffett told Steve Jobs to use the cash to buyback shares.  Had Jobs listened the EPS today would be closer to $100/share and a PE of 10 would be a $1000/share stock.  

    Now if you don't think the future is that bright then management IS doing the right thing by holding tons of cash. Cash is the lifeblood of a corporation that is falling on hard times.  A small share count is not worth much if your company is shrinking fast or losing money (remember nokia and blackberry).  Maybe they think that cash might be necessary in the next 4 to 8 years and thus better to keep it then waste on repurchases I guess.  Only they know from their perch but this seems to be what Cook is telegraphing by his actions.

    You are really talking about the benefit to apples shareholders here rather than to Apple the company. If they flatline earnings but buy back stock so the EPS increases it doesn't matter to the company, just to the shareholder who had stock and who has made money. The companies earnings are still the same. Margins etc. EPS is just a metric.
  • Reply 58 of 99
    clemynx wrote: »
    Yes, genious move. Hope they do that again every time.

    In my opinion buyback when AAPL is falling seems good in the short term, but is very bad in the medium/long term: billions of profits wasted in a zero-profit activity (the buy-back), no new assets for the company, no value transferred to the stakeholders (billions are burnt to recover from fall, not to fuel growth). If Apple executes a buy-back everytime AAPL falls, in the end you will have the same AAPL value, but with all cash billions burnt. As an investor, I would prefer to see those billions burnt in research, development and acquisitions.
  • Reply 59 of 99
    asdasdasdasd Posts: 5,681member
    bradipao wrote: »
    In my opinion buyback when AAPL is falling seems good in the short term, but is very bad in the medium/long term: billions of profits wasted in a zero-profit activity (the buy-back), no new assets for the company, no value transferred to the stakeholders (billions are burnt to recover from fall, not to fuel growth). If Apple executes a buy-back everytime AAPL falls, in the end you will have the same AAPL value, but with all cash billions burnt. As an investor, I would prefer to see those billions burnt in research, development and acquisitions.

    Yeah. Far from showing confidence it shows an inability to do anything else with the money. I remember when people here were all opposed to buy backs. And Apple has retired these stock so where's the money? Prior to the earnings they were where they are in stock price but they had more outstanding stock and a bigger capitalisation. More importantly, if you look at the company, divorced from its shareholders it has less money.
  • Reply 60 of 99
    tbelltbell Posts: 3,146member
    clemynx wrote: »
    Yes, genious move. Hope they do that again every time.

    Yes, brilliant indeed. Apple spends billions on its stock. The stock barely budged as a consequence, and in the long term neither Apple or investors get anything from the move.
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