Apple bought back a record $23.5B of AAPL shares in Q1 as Wall Street peddled "full panic ...

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Comments

  • Reply 41 of 85
    SpamSandwichSpamSandwich Posts: 33,407member
    ireland said:
    The name of the game for crooks on Wall St. is making money, not telling the truth.
    Well, to be fair everyone wants to make money or at least be successful in their own way, don’t you agree? When the game involves competition, as there is in capitalism (and in life generally), there won’t always be winners.
  • Reply 42 of 85
    tundraboytundraboy Posts: 1,884member
    ascii said:
    They were buying $2bn a week for the whole quarter and the price didn't go up?

    Prices probably would have fallen further if they weren't buying.  Increased demand puts positive pressure on prices, that results in either prices rising higher or falling less than they would have.
    radarthekat
  • Reply 43 of 85
    TomETomE Posts: 172member
    Well, I did not sell any Apple before it dropped because I do not invest in / out.  I do buy when it is low and If I believe in the Company, AAPL, I never sell unless Total Disaster is in the wind.  I hold my wet finger up on a regular basis.  I am not the daily trader. Sure you can make a lot of money that way or lose it also.

    Apple , AAPL, is such a good company with such a great cash flow, it is not a bad idea to put more money into Apple.  I like buying discounted cash flows and / or good stocks that are down due to the Anal-ysts. They make money as prophets of doom and gloom.  If I ever read their stupid, un-researched articles , which I take a glimpse at on a daily basis, I actually laugh. These Anal-ysts are mostly absolute idiots of Doom & Gloom.  It is fun for them.  If they an drive the price down (they do) then they or someone else jumps in and buys.  Then someone else brags on Apple and it might go up.  Then their buddies sell the stock for a quick gain. This is akin to insider trading. Except it Outsider Fake News Trading w the fake news being absolutely stupid.

    I have followed and bought and sometimes sold AAPL (when necessary) but I always have bought more afterwards.

    If you have enough cash on hand to wait for the right moment , you only need a 1-2 right moments per year or so.  It is not difficult.  Banks pay essentially nothing. You can still do well throwing a dart (blindfolded) at the Wall Street Journal.  Better if you watch what you are doing and buy right.  Yes, you can profit as a day trader; I do not. I hate Options should be illegal. 
  • Reply 44 of 85
    tundraboytundraboy Posts: 1,884member

    physguy said:
    carnegie said:
    Rayz2016 said:
    Possibly a silly question then:

    Is Apple trying to buy itself out of the stock market circus?

    No. Buying back stock isn't about going private. It doesn't move Apple any closer to being private or, likely, make it easier for someone to take it private. (I'd argue, for reasons I won't get lost in here, that in this case the buy backs make it a tiny bit less likely that Apple would get taken private. That effect isn't particularly relevant though because it would be extremely unlikely anyway.)

    A company can't take itself private. It can't buy back enough stock that it becomes a private company. Someone else - or some combination of someone elses - has to, in effect, buy the company.
    Just a point in fact.  A company can take itself private, I did it to my company to 'get out of the circus' as said.  Apple is not in a position to do so but I can be done.
    Actually, legally speaking, you took the company private.  A corporate entity has to be owned by someone, it can't own itself.  Well, unless it's a foundation which in the US has to be a not-for-profit grant-giving entity.
  • Reply 45 of 85
    tundraboytundraboy Posts: 1,884member

    badmonk said:
    Thanks DED for the spirited defense of the buybacks!  I find it funny that the haters disparage the buybacks.  It is up their with notch-hate, macpro-hate, no-headphone-jack-hate, siri-hate and my all time favorite home-pod-hate which generates even more controversy than a trump tweet.


    Buybacks are disliked by a lot of people because dishonest, self-dealing CEOs whose compensation is tied to the company's stock price have used buybacks to artificially prop up the value of the stock and thus enhance their paychecks.  Corporate boardrooms are one of the few remaining venues for massive legalized corruption.
    SpamSandwichentropysGeorgeBMacstourque
  • Reply 46 of 85
    gatorguygatorguy Posts: 24,176member
    davidw said:
    gatorguy said:
    Rayz2016 said:
    carnegie said:
    Rayz2016 said:
    Possibly a silly question then:

    Is Apple trying to buy itself out of the stock market circus?

    No. Buying back stock isn't about going private. It doesn't move Apple any closer to being private or, likely, make it easier for someone to take it private. (I'd argue, for reasons I won't get lost in here, that in this case the buy backs make it a tiny bit less likely that Apple would get taken private. That effect isn't particularly relevant though because it would be extremely unlikely anyway.)

    A company can't take itself private. It can't buy back enough stock that it becomes a private company. Someone else - or some combination of someone else's - has to, in effect, buy the company.
    Right, because they’re really just promise notes (well, they’re not even that) and nothing to do with controlling the company.  So buying the shares is really about their value and nothing more. So Apple is just doing what everyone else should be doing: buying low and selling high. 

    They must be pretty confident then that these shares are going to be worth a lot more than they are now at some point in the future. 

    Apple retains no value from them. They are in effect burned and removed from the market. They have no remaining value after Apple buys them back and worth exactly zero even at "some point in the future".
    Actually Apple does retain some value from the stocks they buy back and retire, in that they longer have to pay the dividend on those shares. Even if the AAPL shares that Apple bought back are worthless to Apple, every quarter Apple can calculate how much they are saving in dividend payments by calculating how much they are paying to their shareholders vs how much they would have been paying if they didn't buy back and retire those shares and they will see some value in those bought back shares. And that saving is likely close to or more than what it would cost Apple to borrow the same amount that they used to buy back those shares or on the interest Apple was collecting on the money when it was sitting in a foreign bank account. It is only when Apple stop paying a dividend that Apple will no longer retain or see any value for the AAPL shares they bought back and retired.

    It's kind of like the money used to make an extra mortgage payment every year, that goes toward the principle. It doesn't do anything to reduce your monthly mortgage. But if you look at how much principle and interest you are paying with each monthly mortgage payment, more will go toward the principle and less toward the interest at a faster rate than if you didn't make those extra payments. Thus being able to pay off the loan years a head of time by reducing the amount of interest you have to pay over the life of the loan. Only if there was no interest on the loan, that there would be no real value retained by making that extra payment every year.

    An extra payment on the first year of a 30 year loan will save 29 years of interest on that payment amount. Some time in the future, the amount of money Apple use to buy back and retire a share will be less than the dividend it would had had to pay on that share, over the same amount of years. So long as there's a dividend and the shares remain retired.   
    While you are absolutely correct (nice mention BTW) it doesn't change the fact that those shares themselves will be worthless which some posters such as @Rayz2016 had not realized. I'm sure many readers would have erroneously assumed Apple would simply resell them at some future date at a profit since it would seem sensical on the surface.
    edited May 2018 GeorgeBMac
  • Reply 47 of 85
    SpamSandwichSpamSandwich Posts: 33,407member
    badmonk said:
    Thanks DED for the spirited defense of the buybacks!  I find it funny that the haters disparage the buybacks.  It is up their with notch-hate, macpro-hate, no-headphone-jack-hate, siri-hate and my all time favorite home-pod-hate which generates even more controversy than a trump tweet.


    The buybacks at current elevated stock levels make less sense than ever. Apple should continue to provide value to investors by growing the company. A buyback amounts to an accounting trick. And I’m thankful that the current administration, not the previous one, had the wisdom to make repatriating overseas funds a reality. 
  • Reply 48 of 85
    TomETomE Posts: 172member
    If you were out when Apple announced the recent reduction of shares, you missed or will miss the increase in your assets (generally speaking).  If you sell too soon , you miss dividends and special dividends. If you don't like the Stock or the Company or don't have the money to put in the Market, don't buy the Market.  Mr Market does not like you, but Apple does like you the customers.  The stock you buy on the market is not money in Apple's pocket. Apple made the money when they originally sold the stock.  Apple does their stock owners a favor when they buy back stock and put it in their own hands - less shares, more ability to pay dividends to those who actually have the stock outside of Apple.   They have the Cash on Hand or Assets on hand to by back.  Easier than continuously "raising / or holding" the quarterly dividend like a Utility Stock Might Do.  Utilities are so Infrastructure Heavy they have a much harder life than Apple who could actually buy a Utility if they wanted one.  Thankfully Apple does not want a Utility.  Instead, Apple installs Solar Panels to offset their Utility Costs.  Apple can afford it.  You might not have the available cash to do this. 

    I am putting a solar panel with a marine battery (boat battery) with an inverter on my outside garden potting / storage building. It is easier and more sensible than digging up my yard, tunneling under concrete, etc. and running a new cable from the distribution box in my house to the Storage Building.  If my cable had not been fried by lightening, I would use House Power (City) and it would be cheaper.  Dealing with the new cable is not and it will get fried again. So, thus the simple , mind freeing solution is to install a solar panel or panels or batteries and a larger inverter 100 ft away with no cable to the house.  Some times it may not be cheaper, but look at what you want to accomplish.  Power when I need it 100 ft away. City Utilities can slowly disappear.  This is what Apple is doing.  I worked for a very large electric utility and they had a large # of people on site 24/7 dealing with just the generation of power (250 - 300).  A solar farm might have 1-2 maintenance electricians that are actually shared. Almost a no brainer or risk. Especially if the Utility Co buys the green power and the Government subsidizes the solar farm. I don't need or want the Government to subsidize my "little" solar project.
    radarthekat
  • Reply 49 of 85
    red oakred oak Posts: 1,087member
    It is so great that comprehensive tax reform was passed by Congress that made all of this possible, including the significant decrease in the corporate tax rate.   What a great win for the country and for great companies like Apple.   Tim Cook was, as you know, a strong advocate for this all   

    It’s crazy how it almost, somehow did not pass
    edited May 2018
  • Reply 50 of 85
    brucemcbrucemc Posts: 1,541member
    badmonk said:
    Thanks DED for the spirited defense of the buybacks!  I find it funny that the haters disparage the buybacks.  It is up their with notch-hate, macpro-hate, no-headphone-jack-hate, siri-hate and my all time favorite home-pod-hate which generates even more controversy than a trump tweet.


    The buybacks at current elevated stock levels make less sense than ever. Apple should continue to provide value to investors by growing the company. A buyback amounts to an accounting trick. And I’m thankful that the current administration, not the previous one, had the wisdom to make repatriating overseas funds a reality. 
    Let's try this one more time for you.

    - Corporations are "owned" by the shareholders.  They are not owned by the US gov't, nor (generally) by whiny people on Internet forums, analysts, or the tech media.
    - When a company makes more cash than their business needs (accounting for R&D, growth, new products, M&A, etc), then that is "free cash flow".  The question is what to do with this.  A company could look at taking on more organic growth (increasing R&D in order to deliver new products), purchase other companies to grow business, or return the cash to the owners of the company - the shareholders.
    - Having too much excess cash on the balance sheet (e.g. just keeping it) is considered a liability for a company (could be wasted in future by SpamSandwich and thus its future value is less than present).

    What is unique about Apple is that they are generating SO MUCH FREE CASH, that they cannot use it all in while "PRUDENTLY / EFFICIENTLY" running their business.  Apple's whole corporate DNA is about focusing on a few "great ideas".  You can only spend so much on those.  It takes time, not just money, to bring new products to market.  Just starting a whole bunch of side projects "because we have the money" is how companies lose focus and destroy their long term value.

    So Apple has given back to the shareholders - over $275B USD in the last 6 years it would seem.  If Apple had not done this, their net cash balance would be over $400B, just sitting on the books.  Let it grow too large, and some hedge fund could (try anyways) to raise money to buy out Apple, since with so much cash it would help with the debt load to buy them, and the cash is not reflected well in the share price.  Then said hedge fund would milk the company for all it was worth and that would be it.

    While share buybacks at most other companies has been considered controversial, as it is perceived as a means to "goose" the share price in the short term (while siphoning off from investment in business, or accruing large debt), that is not why Apple is doing it.  It is the most efficient means for them to return the cash to the shareholders by having each remaining share (those who don't want to sell) have a larger ownership stake in the company.  
    radarthekat
  • Reply 51 of 85
    entropysentropys Posts: 4,152member
    DAalseth said:
    Apple stock price slumped so Apple was able to buy stock back at a discount. My dad always said "Tis an ill wind that blows nobody good."
    Actually I think your Dad was plagiarising Shakespeare 😁
  • Reply 52 of 85
    cgWerkscgWerks Posts: 2,952member
    Too bad they couldn't buy the whole company back and get off the public market altogether.
  • Reply 53 of 85
    GeorgeBMacGeorgeBMac Posts: 11,421member
    In the years following the Great Recession Apple and many other companies were borrowing money (at super cheap rates) in order to funnel it out to shareholders as stock buybacks and dividends --which is obviously not a sustainable business model.  But it kept the stock market in a 10 year bull market -- the largest period of sustained growth in its history (Well, actually, the 2nd longest).

    But, now that the Fed is raising rates, that mechanism is no longer viable.   So, rather than letting the stock market crash to its fundamental value, they thought up a new ponzi scheme:  The federal government borrows the money, funnels the proceeds to corporations and the corporations funnel it out to their stock holders via share buybacks and dividends.  Essentially, the U.S. government borrows the money from China and gives it to stock holders...

    Like all scams, it's a brilliant scheme that works really, really well.   Until it doesn't.
    Apple borrowed Bonds against the value of itself, effectively its cash overseas. So it paid extremely low interest for flexibility to avoid paying very high tax penalties. It can now hold that debt and spend its cash pile, and pay off its debt from earnings (or cash, but it can probably invest its cash with a far better return!)

    Rates are rising, but Apple no longer needs to issue debt.

    How do you think the fed govt "funneling money to corporations"? Apple is distributing its earnings to shareholders. Apple also holds billions in US Govt securities. 
    The federal government cut corporate taxes -- which they will have to borrow money to pay for.   Most of that borrowed money is not being invested.  It is being distributed to share holders as dividends and stock buy backs.
    gatorguystourque
  • Reply 54 of 85
    radarthekatradarthekat Posts: 3,842moderator
    ireland said:
    The name of the game for crooks on Wall St. is making money, not telling the truth.
    Well, to be fair everyone wants to make money or at least be successful in their own way, don’t you agree? When the game involves competition, as there is in capitalism (and in life generally), there won’t always be winners.
    The problem comes when truth is traded away for money.  As I told those who worked for me, each of us should have in our lives the goal of affording both living expenses and integrity. 
    GeorgeBMacstourque
  • Reply 55 of 85
    radarthekatradarthekat Posts: 3,842moderator
    badmonk said:
    Thanks DED for the spirited defense of the buybacks!  I find it funny that the haters disparage the buybacks.  It is up their with notch-hate, macpro-hate, no-headphone-jack-hate, siri-hate and my all time favorite home-pod-hate which generates even more controversy than a trump tweet.


    The buybacks at current elevated stock levels make less sense than ever. Apple should continue to provide value to investors by growing the company. A buyback amounts to an accounting trick. And I’m thankful that the current administration, not the previous one, had the wisdom to make repatriating overseas funds a reality. 

    I’ve heard a lot of analysts as well as retail investors suggest that share repurchases are nothing more than financial engineering, implying that they do nothing to add value to a company or its stock.

    An additional, and I think significant, value of share repurchases and dividend payments comes from removing unproductive excess cash from the balance sheet. Lets look at Apple, with a $900 billion market cap and about $165 billon of cash and equivalents on the books, net of debt.  Therefore, a dollar invested in Apple represents about 80 cents invested in the actual operating business, which is where the profits come from, and about 20 cents invested to buy a bit of that cash pile, earning about 1%.  Arguably a less-than-ideal allocation of each invested dollar. 

    So a smart investor wants that cash removed from the books, which would either reduce the market cap of the company or, if the cash isn't being valued at even 1x its value, which could be argued is the case with Apple, removing that cash would leave the market cap where it is, which would then imply a higher earnings multiple against the productive operating side of the business, while also taking shares off the market, which would increase earnings per share going forward.

    And a higher earnings multiple means that as earnings grow in the future, the stock will climb faster.  Carl Icahn might have had all of these effects in mind - more efficient allocation of investor's dollars, increase in earnings multiple against operating business, and reduction in shares netting an increase in earnings per remaining share - when he approached Tim Cook years ago.  Pity we didn’t have tax reform at that time, when the stock was in the toilet.  

    SpamSandwich
  • Reply 56 of 85
    GeorgeBMacGeorgeBMac Posts: 11,421member
    brucemc said:
    badmonk said:
    Thanks DED for the spirited defense of the buybacks!  I find it funny that the haters disparage the buybacks.  It is up their with notch-hate, macpro-hate, no-headphone-jack-hate, siri-hate and my all time favorite home-pod-hate which generates even more controversy than a trump tweet.


    The buybacks at current elevated stock levels make less sense than ever. Apple should continue to provide value to investors by growing the company. A buyback amounts to an accounting trick. And I’m thankful that the current administration, not the previous one, had the wisdom to make repatriating overseas funds a reality. 
    Let's try this one more time for you.

    - Corporations are "owned" by the shareholders.  They are not owned by the US gov't, nor (generally) by whiny people on Internet forums, analysts, or the tech media.
    - When a company makes more cash than their business needs (accounting for R&D, growth, new products, M&A, etc), then that is "free cash flow".  The question is what to do with this.  A company could look at taking on more organic growth (increasing R&D in order to deliver new products), purchase other companies to grow business, or return the cash to the owners of the company - the shareholders.
    - Having too much excess cash on the balance sheet (e.g. just keeping it) is considered a liability for a company (could be wasted in future by SpamSandwich and thus its future value is less than present).

    What is unique about Apple is that they are generating SO MUCH FREE CASH, that they cannot use it all in while "PRUDENTLY / EFFICIENTLY" running their business.  Apple's whole corporate DNA is about focusing on a few "great ideas".  You can only spend so much on those.  It takes time, not just money, to bring new products to market.  Just starting a whole bunch of side projects "because we have the money" is how companies lose focus and destroy their long term value.

    So Apple has given back to the shareholders - over $275B USD in the last 6 years it would seem.  If Apple had not done this, their net cash balance would be over $400B, just sitting on the books.  Let it grow too large, and some hedge fund could (try anyways) to raise money to buy out Apple, since with so much cash it would help with the debt load to buy them, and the cash is not reflected well in the share price.  Then said hedge fund would milk the company for all it was worth and that would be it.

    While share buybacks at most other companies has been considered controversial, as it is perceived as a means to "goose" the share price in the short term (while siphoning off from investment in business, or accruing large debt), that is not why Apple is doing it.  It is the most efficient means for them to return the cash to the shareholders by having each remaining share (those who don't want to sell) have a larger ownership stake in the company.  
    Good story!
    The truth is:  The stock buybacks began several years back when Carl Icahn raised enough fuss as an activist shareholder to force it.  At that point, Apple had to borrow the money in order to pay it out to the shareholders.  But, with interest rates near zero that wasn't a big deal.  

    Now interest rates are rising which makes that strategy far less appealing.   So, the federal government borrowed money (or will borrow it) to issue tax cuts -- which Apple is now distributing to its stock holders.   So, eventually the American people will have to pay the debt that Apple is distributing....
    stourque
  • Reply 57 of 85
    radarthekatradarthekat Posts: 3,842moderator

    In the years following the Great Recession Apple and many other companies were borrowing money (at super cheap rates) in order to funnel it out to shareholders as stock buybacks and dividends --which is obviously not a sustainable business model.  But it kept the stock market in a 10 year bull market -- the largest period of sustained growth in its history (Well, actually, the 2nd longest).

    But, now that the Fed is raising rates, that mechanism is no longer viable.   So, rather than letting the stock market crash to its fundamental value, they thought up a new ponzi scheme:  The federal government borrows the money, funnels the proceeds to corporations and the corporations funnel it out to their stock holders via share buybacks and dividends.  Essentially, the U.S. government borrows the money from China and gives it to stock holders...

    Like all scams, it's a brilliant scheme that works really, really well.   Until it doesn't.
    Apple borrowed Bonds against the value of itself, effectively its cash overseas. So it paid extremely low interest for flexibility to avoid paying very high tax penalties. It can now hold that debt and spend its cash pile, and pay off its debt from earnings (or cash, but it can probably invest its cash with a far better return!)

    Rates are rising, but Apple no longer needs to issue debt.

    How do you think the fed govt "funneling money to corporations"? Apple is distributing its earnings to shareholders. Apple also holds billions in US Govt securities. 
    The federal government cut corporate taxes -- which they will have to borrow money to pay for.   Most of that borrowed money is not being invested.  It is being distributed to share holders as dividends and stock buy backs.
    And what exactly do you think a buyback does?  Apple is taking money that was sitting overseas, not being very productive in any capacity, and placing it in the hands of Apple investors who no longer wish to be Apple investors.  That means those investors, since they are presumably still investors, can disperse that money into other investments.  And investments spur economic activity; that’s why we have stock markets that allow people to invest in economic enterprise.  Why would you care whether Apple builds the next factory, retail concept, biopharma, or energy project.  Let Apple repatriate it’s horde, place it into the hands of those who would sell Apple their Apple shares, and then go invest it elsewhere, in a business that will build those things and create jobs.  Why can’t people see beyond one dimension on these issues? 
  • Reply 58 of 85
    cgWerkscgWerks Posts: 2,952member
    GeorgeBMac said:
    Now interest rates are rising which makes that strategy far less appealing.   So, the federal government borrowed money (or will borrow it) to issue tax cuts -- which Apple is now distributing to its stock holders.   So, eventually the American people will have to pay the debt that Apple is distributing....
    Unless the economy revs up enough to make up for the losses, which I suppose is the game plan. But, I'm sure they would waste any gains before debt got paid down anyway.

    The USA is in such a mess... and that's not a partisan, political statement. If you look at what Congress is doing, it's quite a cooperative effort to ruin the country.

    I'm sure once they get the world-government in place, we'll all live happily ever after... not.
    GeorgeBMac
  • Reply 59 of 85
    cgWerkscgWerks Posts: 2,952member
    radarthekat said:
    And what exactly do you think a buyback does?  Apple is taking money that was sitting overseas, not being very productive in any capacity, and placing it in the hands of Apple investors who no longer wish to be Apple investors.  That means those investors, since they are presumably still investors, can disperse that money into other investments.  And investments spur economic activity; that’s why we have stock markets that allow people to invest in economic enterprise.  Why would you care whether Apple builds the next factory, retail concept, biopharma, or energy project.  Let Apple repatriate it’s horde, place it into the hands of those who would sell Apple their Apple shares, and then go invest it elsewhere, in a business that will build those things and create jobs.  Why can’t people see beyond one dimension on these issues? 
    I think the assumption was that this money is coming from the lower USA tax rates on corporations... but my impression was the same as yours regarding overseas money. I was thinking of asking something similar.

    Also, the basic liberal story is that evil corporations, share-holders, and such don't reinvest, they just pocket the money to screw the poor. Probably where that is coming from. While there is some truth to that, it isn't quite that black and white.
  • Reply 60 of 85
    DanielEranDanielEran Posts: 290editor
    rob53 said:
    gatorguy said:
    Rayz2016 said:
    Possibly a silly question then:

    Is Apple trying to buy itself out of the stock market circus?
    Why would the stock market even matter to Apple now as a revenue-earning business? They don't receive any additional funding from their stock when it's bought or sold. I get that individual stockholders may benefit from the stock buybacks eventually but for general Apple owner, the vast majority of whom are NOT individual investors in Apple, I don't see why the stock price up or down or sideways matters at all to either Apple as a profit-making business or to their customers. When the stock price dives or goes up does it have any material effect on Apple's profit or loss or available funds?
    Finally, someone else brings up the fact that no money gambled in the stock market ever reaches Apple the company's pocket. None of AAPL's $875B (as of right now) market cap money is available to Apple, it's all in the super Lotto gambling pot. Of course, employees of Apple would like to see AAPL continue to rise because they have shares they can sell but Apple the company doesn't really care. When will people understand the separation?
    Apple (like all public companies) is affected by its stock price in a variety of ways, including the delta value in stock-based compensation it can offer recruited talent, and the value of stock-based acquisitions.

    Many companies are effectively printing new stock for employment awards, which has the effect of eroding the value of outstanding shares (dilution). It's like a country printing money. Buybacks do the opposite and have a real impact on the value of a company's stock and what it can do with it. 

    Stock-based compensation is a critically important way for tech companies to recruit talent and experienced management, so Gater trying to blow this off as immaterial is totally incorrect. Google would love to have an extra $100 billion to buy back its stock with. Saying it doesn't matter is the height of willful ignorance.
    radarthekatcgWerks
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