Apple's $62.9 billion stock buyback program called a bad investment in new report

123578

Comments

  • Reply 81 of 152
    radarthekatradarthekat Posts: 3,855moderator
    gatorguy said:
    My guess is that they're also trying to lower the number of shares being sold by people trying to manipulate the stock. Fewer shares available, fewer people who will be trying to short the stock all the time. 
    Isn't spending $250B+ on artificially increasing the demand for Apple stock via a "buyback and destroy" plan in itself a method of manipulating Apple stock price? What would the price be if they hadn't gone down that road? 
    I expect so much more from you.  I really do.
  • Reply 82 of 152
    radarthekatradarthekat Posts: 3,855moderator
    brucemc said:
    A few things to consider:
    - Apple started to return cash to shareholders as a result of generating so much of it.  Their net cash position was well over $100B.  The iPhone phenomenon was bigger than anything before, and it was after the Jobs era when the bucket loads of cash started to pore in (for those who want to focus on Jobs' view)
    - A focused company - which, if you know anything about Apple, you know they strive for this - can only invest in so much at one time.  More money, past a certain point, does not solve a problem faster.  Anyone who understands product development and engineering knows this.  Things take time, regardless of money.
    - So there is excess, or free cash, and as you should know with Apple, it is a lot - about $50B/year.  Believe it or not, but high amounts of cash on a companies balance sheet is *not* considered a good thing.  People don't invest in Apple to gain a share of cash earning little money.  So that cash has to be dealt with.
    - Some would argue that Apple should go around buying numerous large companies (Netflix, Disney, Tesla) - and spend all of their money that way.  But for such shrewd investors, they should look at the history of large acquisitions to see how they turned out for company value.  Hint - it isn't pretty (something like 80% are value destructive).  Now think about Apple's culture and how that would work.
    - Or there is returning it to shareholders.  That can be with dividends (taxable in the year received) or buybacks with retirement, which reduce the count and increase ownership %.  Apple does both.  Apple has been raising their dividend on average greater than 10% each year, which is considered a gold standard.
    - Some may look at the buybacks as "burning money", but at the end of the day it is increasing the % ownership in Apple for remaining shareholders, and if you think Apple is a well run company, with great products, which generate money, and have a solid future - then that is a good thing.

    Melgross appears to be a successful investor, and as such his opinion has value, but while he has been skeptical of buybacks, I can't recall him making any suggestions as to how Apple should manage their excess cash.  For the cash levels that Apple is making, the choice is really huge dividends each year, buybacks, or large company acquisitions.

    Apple is not like many other companies performing buybacks, who are borrowing huge money to do so (arguing that it is OK with rates so low).  Apple only borrowed effectively against foreign cash, to have domestic funds for buybacks.  Their net cash position was, and is, strong.  With tax changes, Apple has access to its foreign cash at an acceptable rate, and no longer needs to borrow to fund its shareholder return programs.  Apple's buybacks are funded from free cash flow - not increasing net debt.  Hopefully people can understand the difference.
    Apple didn't start paying large dividends or make stock buy backs because they had excess cash.   They did it because activist share holders like Carl Icahn forced them to.   It was not a "business decision".
    In what way did Icahn Force Apple to do anything?  The only force he could apply was in the court of public opinion.  We all know that has little sway with Apple.  Nope, it’s far more likely your view of history is distorted than Apple bowed to Icahn. 
  • Reply 83 of 152
    radarthekatradarthekat Posts: 3,855moderator
    What was the opportunity cost of using those funds to buy back their stock? What other investment could they have made instead?
    A buyback is not an investment.   It's a confession that the company doesn't have faith in investing in itself and its own products.   It's essentially a give-away to the stockholders.  

    In this particular case, it was essentially laundering the money from the Tax-Scam:  The U.S. is borrowing $1.5trillion dollars that mostly just got passed through corporations such as Apple to the stockholders. 

    I wonder if those stockholders will return the money when the country declares it has to cut back on Medicare and other programs because it gave away its money to them?
    Hmm, let’s do a mind experiment.  Imagine Apple had $40 TRILLION in cash.  At that post, admittedly an absurd amount, would you consider that Apple has more money than it needs to fund ongoing operations, future product and services roadmap development, infrastructure buildout, and technology acquisitions?  I think we can agree that at $40 trillion in cash, Apple would certainly be considered to have excess cash on the books that it could disseminate without any harm to the future prospects for the business.  What about $250 billion?  Apple has stated, even at this amount, the company has excess cash.  So it’s indeed not an admission that the company doesn’t have faith in itself and its own products.  It’s an admission that the company has all the cash it needs to drive itself forward on all fronts, and still has more cash; excess cash.  It’s that excess cash that it’s deploying to repurchase shares and pay dividends.  (Separate argument as to how much of each it should be doing.)
    Nice thought experiment.   But Apple did not start paying large dividends & making stock buybacks because they had more cash than they knew what to do with (nice fantasy!) nor because they thought it was the best use of their money.  Rather, it was corporate raiders/activists like Carl Icahn who forced them to start paying out big bucks to stock holders.   It was not a decision made in the best interests of the business but in the best interests of stock holders.

    It would have been interesting if Steve had been around to confront Icahn.   I would not have been pretty.  But, with nearly $7Billion in Apple shares, Icahn carried a lot of weight:

    "Icahn revealed to CNBC's Scott Wapner on Tuesday [5/19/2005] the only thing he actually wants from the company. Which is basically the only thing he's ever wanted from Apple.

    "We put this letter out for one purpose, Scott, to get the company to buy back more stock," Icahn said. "The one thing I disagree with the company on is not buying a great deal more stock here ... that's all I'm saying."


    The fact you equate Icahn’s desire for bigger buybacks with Apple’s subsequent actions does not create a cause and effect relationship.  Apple didn’t begin buying back the volume of shares Icahn wanted them to until this past year, long after Icahn exited his position and shut up about the matter.  
  • Reply 84 of 152
    radarthekatradarthekat Posts: 3,855moderator
    gatorguy said:
    What was the opportunity cost of using those funds to buy back their stock? What other investment could they have made instead?
    A buyback is not an investment.   It's a confession that the company doesn't have faith in investing in itself and its own products.   It's essentially a give-away to the stockholders.  

    In this particular case, it was essentially laundering the money from the Tax-Scam:  The U.S. is borrowing $1.5trillion dollars that mostly just got passed through corporations such as Apple to the stockholders. 

    I wonder if those stockholders will return the money when the country declares it has to cut back on Medicare and other programs because it gave away its money to them?
    Hmm, let’s do a mind experiment.  Imagine Apple had $40 TRILLION in cash.  At that post, admittedly an absurd amount, would you consider that Apple has more money than it needs to fund ongoing operations, future product and services roadmap development, infrastructure buildout, and technology acquisitions?  I think we can agree that at $40 trillion in cash, Apple would certainly be considered to have excess cash on the books that it could disseminate without any harm to the future prospects for the business.  What about $250 billion?  Apple has stated, even at this amount, the company has excess cash.  So it’s indeed not an admission that the company doesn’t have faith in itself and its own products.  It’s an admission that the company has all the cash it needs to drive itself forward on all fronts, and still has more cash; excess cash.  It’s that excess cash that it’s deploying to repurchase shares and pay dividends.  (Separate argument as to how much of each it should be doing.)
    What about paying Apple Store employees more? Maybe increasing benefits, perhaps even extending them to part-time employees?

    Consider increasing what they're willing to pay support staff like receptionists and cleaning crews and various and sundry "assistants. Don't penny-pinch contractors and component providers so hard so that those companies can afford to pay their employees a little more?

    IMO all of those things would benefit the economy more than a stock buyback which benefits the 1%'ers and Apple executive team whose pay comes from stock grants and stock performance bonuses (odd how that works out huh?).
    And Apple would still bank billions in profit after taking care of the little people better.  A plus? The great PR they'd get from doing so. I don't see a loser in that scenario. 

    As a side bonus it also improves the odds that those closer to minimum wage Apple employees, and contractors employees, and "partner company" employees could afford to buy nice Apple gear and bring them firmly into the Apple fold. 
    You do know that Apple was instrumental in the significant raises Foxconn delivered to production workers over recent history, in many cases quadrupling their pay versus similar jobs at other companies.  That comes out of Apple’s coffers.  I note you didn’t mention those employees; perhaps myopia or perhaps tribalism, but my own view is that the welfare of a person in China or anywhere else should be considered along with everyone else.  Maybe you disagree.  Certainly many must, as Apple got no good press at all out of its Herculean efforts on that front.  Perhaps you just were t paying attention.

    You also didn’t mention Apple’s efforts in education, including donations to schools, etc.  Or it’s environmental initiatives.  Plenty being done on that front to cheer about.  (Not hearing any cheering).  I get the sense that if Apple did as you say, skewing the income scale to the detriment of other businesses without the billions to match Apple’s generosity, we’d gear Bout that aspect rather than any good press about Apple’s generosity.  

    Think, man.  
  • Reply 85 of 152
    radarthekatradarthekat Posts: 3,855moderator
    brucemc said:
    brucemc said:
    A few things to consider:
    - Apple started to return cash to shareholders as a result of generating so much of it.  Their net cash position was well over $100B.  The iPhone phenomenon was bigger than anything before, and it was after the Jobs era when the bucket loads of cash started to pore in (for those who want to focus on Jobs' view)
    - A focused company - which, if you know anything about Apple, you know they strive for this - can only invest in so much at one time.  More money, past a certain point, does not solve a problem faster.  Anyone who understands product development and engineering knows this.  Things take time, regardless of money.
    - So there is excess, or free cash, and as you should know with Apple, it is a lot - about $50B/year.  Believe it or not, but high amounts of cash on a companies balance sheet is *not* considered a good thing.  People don't invest in Apple to gain a share of cash earning little money.  So that cash has to be dealt with.
    - Some would argue that Apple should go around buying numerous large companies (Netflix, Disney, Tesla) - and spend all of their money that way.  But for such shrewd investors, they should look at the history of large acquisitions to see how they turned out for company value.  Hint - it isn't pretty (something like 80% are value destructive).  Now think about Apple's culture and how that would work.
    - Or there is returning it to shareholders.  That can be with dividends (taxable in the year received) or buybacks with retirement, which reduce the count and increase ownership %.  Apple does both.  Apple has been raising their dividend on average greater than 10% each year, which is considered a gold standard.
    - Some may look at the buybacks as "burning money", but at the end of the day it is increasing the % ownership in Apple for remaining shareholders, and if you think Apple is a well run company, with great products, which generate money, and have a solid future - then that is a good thing.

    Melgross appears to be a successful investor, and as such his opinion has value, but while he has been skeptical of buybacks, I can't recall him making any suggestions as to how Apple should manage their excess cash.  For the cash levels that Apple is making, the choice is really huge dividends each year, buybacks, or large company acquisitions.

    Apple is not like many other companies performing buybacks, who are borrowing huge money to do so (arguing that it is OK with rates so low).  Apple only borrowed effectively against foreign cash, to have domestic funds for buybacks.  Their net cash position was, and is, strong.  With tax changes, Apple has access to its foreign cash at an acceptable rate, and no longer needs to borrow to fund its shareholder return programs.  Apple's buybacks are funded from free cash flow - not increasing net debt.  Hopefully people can understand the difference.
    Apple didn't start paying large dividends or make stock buy backs because they had excess cash.   They did it because activist share holders like Carl Icahn forced them to.   It was not a "business decision".
    You are completely incorrect.  There is no evidence to substantiate such a claim.
    You lack of knowledge does not affect the truth.  Sorry.
    While your comments often cast serious doubt on your ability to grasp facts and history.  Tit for tat
  • Reply 86 of 152
    radarthekatradarthekat Posts: 3,855moderator

    carnegie said:
    gatorguy said:
    larryjw said:
    crowley said:
    jasenj1 said:
    My understanding is that buy backs are supposed to increase the value of the remaining shares. 
    No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

    If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

    Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

    In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 
    Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 
    The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

    Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.
    Perfect explanation.  But too subtle for most to comprehend.  That’s the reason guys like you and I get blowback when we attempt to explain it.  Math and logic, ought to be taught in schools.  Lol

    edited December 2018
  • Reply 87 of 152
    radarthekatradarthekat Posts: 3,855moderator

    gatorguy said:
    carnegie said:
    gatorguy said:
    larryjw said:
    crowley said:
    jasenj1 said:
    My understanding is that buy backs are supposed to increase the value of the remaining shares. 
    No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

    If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

    Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

    In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 
    Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 
    The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

    Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.
    As a base premise you're assuming that the buybacks actually increased the value of their stock's cash value, for which the evidence is scant IMO. $250B and five years later and their tech brethren who did not (as aggressively if at all) resort to the same use of their cash have performed much the same if not better in the stock market AFAICT. In the five years Apple has been repurchasing/retiring their own shares they've averaged a return of roughly 190%. That compares to 560% for Amazon, and 195% return on Alphabet neither of whom aggressively pursued the same strategies for using their cash assets.

    Is there some evidence of how much Apple shares have been impacted dollarwise? is the price 15%, 25% higher, even more, than it would have been had the stock buybacks not occurred? If not is it possible (probable?) that the attempt at artificially manipulating demand via buybacks may not have been the most efficient way to return value to Apple stockholders? In a nutshell what has their "greater equity in the company" actually delivered for them?

    With such a glut of cash (IMO not unlike gorging on food because, well, you can), could Apple be better served in the long run by marginally reducing product costs which likely increases market share?
    You’re not controlling for variables.  The fact the Apple is so secretive affects its market valuation.  The fact of the history of the PC versus Mac and now iOS versus Android wars, which is really a story of one company going up against an entire industry of companies, with the latter applying far, far higher advertising and marketing budgets in aggregate to sway opinion away from the one wildcard outlier, this also affects market valuation.  The fact these other companies are story stocks, and Apple isn’t, affects its relative valuation.  You haven’t even attempted to mention these contributing factors, much less control for them.  You disappoint me on a level that transcends the lucidity of your comments.  It goes much deeper.  
    edited December 2018
  • Reply 88 of 152
    carnegiecarnegie Posts: 1,078member
    gatorguy said:
    carnegie said:
    gatorguy said:
    larryjw said:
    crowley said:
    jasenj1 said:
    My understanding is that buy backs are supposed to increase the value of the remaining shares. 
    No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

    If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

    Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

    In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 
    Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 
    The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

    Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.
    As a base premise you're assuming that the buybacks actually increased the value of their stock's cash value, for which the evidence is scant IMO. $250B and five years later and their tech brethren who did not (as aggressively if at all) resort to the same use of their cash have performed much the same if not better in the stock market AFAICT. In the five years Apple has been repurchasing/retiring their own shares they've averaged a return of roughly 190%. That compares to 560% for Amazon, and 195% return on Alphabet neither of whom aggressively pursued the same strategies for using their cash assets.

    Is there some evidence of how much Apple shares have been impacted dollarwise? is the price 15%, 25% higher, even more, than it would have been had the stock buybacks not occurred? If not is it possible (probable?) that the attempt at artificially manipulating demand via buybacks may not have been the most efficient way to return value to Apple stockholders? In a nutshell what has their "greater equity in the company" actually delivered for them?

    With such a glut of cash (IMO not unlike gorging on food because, well, you can), could Apple be better served in the long run by marginally reducing product costs which likely increases market share?
    I’ve addressed the counterfactual in other posts (here and in other threads): Do you think that Apple’s market cap would be $325 billion higher today if it had around $240 billion more in net cash on its balance sheet? Back in October, at its peak, would Apple’s market cap have been $500 billion higher if it had $240 billion more in net cash on its balance sheet.

    We know how much concentration has resulted from the buybacks, and we know the effective costs of those buybacks (give or take a little, as we have to estimate offsetting effects of interest and dividend differences). So we can frame the question, when it comes to whether the buybacks have had a positive effect on Apple’s share price, in fairly simple terms.

    As for your last inquiry, I think the opposite has long been the case. I think Apple has long left money on the table - by pricing much of its product line-up below what would be optimal (when it comes to near term profits) - in an effort to increase the rate of installed base growth. I think, for instance, that an across-the-board 10% decrease in prices wouldn’t result in the 25% or so increase in sales which would be needed to offset it.

    For a while now Apple’s biggest competition has come from itself, e.g. from used Apple devices and the degree to which older devices remain in use. Apple is now taking advantage of that reality. It’s raised the range of pricing for its newer models and cleared out room toward the lower end (of its price range, not of the price range of the market in general) for used devices and newly sold older models to thrive. It’s not competing with itself as much as it used to, which leaves it without a lot of real competition. Those who don’t mind paying more can do so (and have the costs of their premium devices offset by longer use cycles or significant resale value). Those who do mind paying more can buy used or older models sold new. They can still feel like they’re getting quality devices and the benefits of being in the Apple ecosystem. Apple gets to make closer to what the market will bear on sales of its premium devices (i.e. it gets the money it used to leave on the table), and it gets to maintain a strong - for now still growing - installed base.
    edited December 2018 tmayradarthekat
  • Reply 89 of 152
    tmaytmay Posts: 6,367member
    tmay said:
    Apple didn't start paying large dividends or make stock buy backs because they had excess cash.   They did it because activist share holders like Carl Icahn forced them to.   It was not a "business decision".
    You claim to know something but it just does not hold up at all. Icahn had less than 1% of the company. Totally irrelevant. He also sold in 2016 when he had some profit and missed a 100% gain since then. In 2018, Apple increased the buybacks more than twofold and said it planned to get to cash neutral in the future. There was no pressure, they clearly judge it to be the best use of the money to create shareholder value.
    It was definitely Icahn who fought that battle and got the ball rolling.   But you are correct that he later sold out and the recent share buybacks and dividends have been all Apple's doing -- especially passing on the money from the tax scam to the shareholders.

    I was pointing out that, without Icahn, Apple would likely still be in the mode of reinvesting its profits rather than distributing them.   But, who knows?  It might have happened anyway.
    Given Apple's current cash, and it's $50B yearly profit (and growing), I'm not seeing how Apple could invest in itself fast enough to utilize all of the cash. 

    Still, there are plenty of analysts that state that Apple should use the money for large acquisitions, for example buying Tesla or Netflix, which in my opinion would be the height of folly.

    Fortunately, Apple doesn't see large acquisitions adding shareholder value.
    So, you are saying giving away their money is a better investment than in themselves?
    That's very altruistic of them.   But its a pretty low bar for an investment.
    They are "giving away" the excess cash to the investors, you know, the entities that actually own Apple. 

    How about you give me an example of how Apple can "invest in themselves" beyond what they are already doing?
  • Reply 90 of 152
    gatorguygatorguy Posts: 24,285member

    gatorguy said:
    carnegie said:
    gatorguy said:
    larryjw said:
    crowley said:
    jasenj1 said:
    My understanding is that buy backs are supposed to increase the value of the remaining shares. 
    No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

    If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

    Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

    In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 
    Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 
    The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

    Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.
    As a base premise you're assuming that the buybacks actually increased the value of their stock's cash value, for which the evidence is scant IMO. $250B and five years later and their tech brethren who did not (as aggressively if at all) resort to the same use of their cash have performed much the same if not better in the stock market AFAICT. In the five years Apple has been repurchasing/retiring their own shares they've averaged a return of roughly 190%. That compares to 560% for Amazon, and 195% return on Alphabet neither of whom aggressively pursued the same strategies for using their cash assets.

    Is there some evidence of how much Apple shares have been impacted dollarwise? is the price 15%, 25% higher, even more, than it would have been had the stock buybacks not occurred? If not is it possible (probable?) that the attempt at artificially manipulating demand via buybacks may not have been the most efficient way to return value to Apple stockholders? In a nutshell what has their "greater equity in the company" actually delivered for them?

    With such a glut of cash (IMO not unlike gorging on food because, well, you can), could Apple be better served in the long run by marginally reducing product costs which likely increases market share?
    You’re not controlling for variables.  The fact the Apple is so secretive affects its market valuation.  The fact of the history of the PC versus Mac and now iOS versus Android wars, which is really a story of one company going up against an entire industry of companies, with the latter applying far, far higher advertising and marketing budgets in aggregate to sway opinion away from the one wildcard outlier, this also affects market valuation.  The fact these other companies are story stocks, and Apple isn’t, affects its relative valuation.  You haven’t even attempted to mention these contributing factors, much less control for them.  You disappoint me on a level that transcends the lucidity of your comments.  It goes much deeper.  
    In essense I'm asking for any solid evidence of positive impacts on Apple stock prices directly due to the buybacks compared to if they had not occurred.

    You're writing a whole lotta words, and they do seem on the surface so authoritative and all,..
    But nothing you said answers even ONE of the questions I posed. Why bother trying to chide me if you don't any of the answers yourself? 

    I think I'll watch for Carnegie's reply instead. 
    edited December 2018
  • Reply 91 of 152
    If you have a long term(10+ years) positive outlook on Apple then the buyback program is a home run.  Especially at these prices.  Apple could easily take 12-15% of the outstanding shares off the table in 2019 alone.  And still have 3 more years of huge buyback amounts before approaching neutral cash.
    tmay
  • Reply 92 of 152
    What was the opportunity cost of using those funds to buy back their stock? What other investment could they have made instead?
    A buyback is not an investment.   It's a confession that the company doesn't have faith in investing in itself and its own products.   It's essentially a give-away to the stockholders.  

    In this particular case, it was essentially laundering the money from the Tax-Scam:  The U.S. is borrowing $1.5trillion dollars that mostly just got passed through corporations such as Apple to the stockholders. 

    I wonder if those stockholders will return the money when the country declares it has to cut back on Medicare and other programs because it gave away its money to them?
    Hmm, let’s do a mind experiment.  Imagine Apple had $40 TRILLION in cash.  At that post, admittedly an absurd amount, would you consider that Apple has more money than it needs to fund ongoing operations, future product and services roadmap development, infrastructure buildout, and technology acquisitions?  I think we can agree that at $40 trillion in cash, Apple would certainly be considered to have excess cash on the books that it could disseminate without any harm to the future prospects for the business.  What about $250 billion?  Apple has stated, even at this amount, the company has excess cash.  So it’s indeed not an admission that the company doesn’t have faith in itself and its own products.  It’s an admission that the company has all the cash it needs to drive itself forward on all fronts, and still has more cash; excess cash.  It’s that excess cash that it’s deploying to repurchase shares and pay dividends.  (Separate argument as to how much of each it should be doing.)
    While Apple slowly buys back shares, they will eventually take the company private if the buybacks continue long enough. This would remove all the “stock analysts” from the equation. Whether that ever comes to fruition or not, I am satisfied knowing that I own a slightly higher portion of the company each time they buy back shares, especially as I reinvest dividends.
  • Reply 93 of 152
    tmaytmay Posts: 6,367member
    rainmaker said:
    What was the opportunity cost of using those funds to buy back their stock? What other investment could they have made instead?
    A buyback is not an investment.   It's a confession that the company doesn't have faith in investing in itself and its own products.   It's essentially a give-away to the stockholders.  

    In this particular case, it was essentially laundering the money from the Tax-Scam:  The U.S. is borrowing $1.5trillion dollars that mostly just got passed through corporations such as Apple to the stockholders. 

    I wonder if those stockholders will return the money when the country declares it has to cut back on Medicare and other programs because it gave away its money to them?
    Hmm, let’s do a mind experiment.  Imagine Apple had $40 TRILLION in cash.  At that post, admittedly an absurd amount, would you consider that Apple has more money than it needs to fund ongoing operations, future product and services roadmap development, infrastructure buildout, and technology acquisitions?  I think we can agree that at $40 trillion in cash, Apple would certainly be considered to have excess cash on the books that it could disseminate without any harm to the future prospects for the business.  What about $250 billion?  Apple has stated, even at this amount, the company has excess cash.  So it’s indeed not an admission that the company doesn’t have faith in itself and its own products.  It’s an admission that the company has all the cash it needs to drive itself forward on all fronts, and still has more cash; excess cash.  It’s that excess cash that it’s deploying to repurchase shares and pay dividends.  (Separate argument as to how much of each it should be doing.)
    While Apple slowly buys back shares, they will eventually take the company private if the buybacks continue long enough. This would remove all the “stock analysts” from the equation. Whether that ever comes to fruition or not, I am satisfied knowing that I own a slightly higher portion of the company each time they buy back shares, especially as I reinvest dividends.
    While I don't think that the company will ever go private, it appears likely that it will transition to "longs" as yourself and Warren Buffet, hence why I'm not understanding all of the "sturm and drang" (storm and stress) of some of the posters.

    FFS, all of these analysts are merely creating a much more favorable climate for buybacks. Of course, some wags would say that Apple spiked the ball by eliminating reporting of iPhone unit sales, initiating an immediate hit on the stock price. I note that one comment even chastised Apple management for taking advantage of the stock revaluation, as if Apple management didn't already have detailed knowledge of Apple's product roadmap, which is where the "treasure" lies.

    A P/E hovering around 13 looks like a pretty good opportunity for a savvy investor.


    radarthekatapplejakes
  • Reply 94 of 152
    radarthekatradarthekat Posts: 3,855moderator
    gatorguy said:

    gatorguy said:
    carnegie said:
    gatorguy said:
    larryjw said:
    crowley said:
    jasenj1 said:
    My understanding is that buy backs are supposed to increase the value of the remaining shares. 
    No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

    If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

    Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

    In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 
    Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 
    The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

    Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.
    As a base premise you're assuming that the buybacks actually increased the value of their stock's cash value, for which the evidence is scant IMO. $250B and five years later and their tech brethren who did not (as aggressively if at all) resort to the same use of their cash have performed much the same if not better in the stock market AFAICT. In the five years Apple has been repurchasing/retiring their own shares they've averaged a return of roughly 190%. That compares to 560% for Amazon, and 195% return on Alphabet neither of whom aggressively pursued the same strategies for using their cash assets.

    Is there some evidence of how much Apple shares have been impacted dollarwise? is the price 15%, 25% higher, even more, than it would have been had the stock buybacks not occurred? If not is it possible (probable?) that the attempt at artificially manipulating demand via buybacks may not have been the most efficient way to return value to Apple stockholders? In a nutshell what has their "greater equity in the company" actually delivered for them?

    With such a glut of cash (IMO not unlike gorging on food because, well, you can), could Apple be better served in the long run by marginally reducing product costs which likely increases market share?
    You’re not controlling for variables.  The fact the Apple is so secretive affects its market valuation.  The fact of the history of the PC versus Mac and now iOS versus Android wars, which is really a story of one company going up against an entire industry of companies, with the latter applying far, far higher advertising and marketing budgets in aggregate to sway opinion away from the one wildcard outlier, this also affects market valuation.  The fact these other companies are story stocks, and Apple isn’t, affects its relative valuation.  You haven’t even attempted to mention these contributing factors, much less control for them.  You disappoint me on a level that transcends the lucidity of your comments.  It goes much deeper.  
    In essense I'm asking for any solid evidence of positive impacts on Apple stock prices directly due to the buybacks compared to if they had not occurred.

    You're writing a whole lotta words, and they do seem on the surface so authoritative and all,..
    But nothing you said answers even ONE of the questions I posed. Why bother trying to chide me if you don't any of the answers yourself? 

    I think I'll watch for Carnegie's reply instead. 
    That’s your M.O., to ask others to provide evidence to refute your counter factuals and ill-nformed assertions.  I choose not to play your game.  Let’s see you provide evidence of your assertions, factoring for the variables you left out.  

    Oh, and Carnegie wrote his reply just five minutes after I wrote mine, and you wrote your reply to me six minutes after that.  So you need not have waited for Carhegie’s reply, it was right there for you to review.  But yes, Carnegie does a great job setting the record straight, doesn’t he?  
    edited December 2018 tmay
  • Reply 95 of 152
    radarthekatradarthekat Posts: 3,855moderator

    rainmaker said:
    What was the opportunity cost of using those funds to buy back their stock? What other investment could they have made instead?
    A buyback is not an investment.   It's a confession that the company doesn't have faith in investing in itself and its own products.   It's essentially a give-away to the stockholders.  

    In this particular case, it was essentially laundering the money from the Tax-Scam:  The U.S. is borrowing $1.5trillion dollars that mostly just got passed through corporations such as Apple to the stockholders. 

    I wonder if those stockholders will return the money when the country declares it has to cut back on Medicare and other programs because it gave away its money to them?
    Hmm, let’s do a mind experiment.  Imagine Apple had $40 TRILLION in cash.  At that post, admittedly an absurd amount, would you consider that Apple has more money than it needs to fund ongoing operations, future product and services roadmap development, infrastructure buildout, and technology acquisitions?  I think we can agree that at $40 trillion in cash, Apple would certainly be considered to have excess cash on the books that it could disseminate without any harm to the future prospects for the business.  What about $250 billion?  Apple has stated, even at this amount, the company has excess cash.  So it’s indeed not an admission that the company doesn’t have faith in itself and its own products.  It’s an admission that the company has all the cash it needs to drive itself forward on all fronts, and still has more cash; excess cash.  It’s that excess cash that it’s deploying to repurchase shares and pay dividends.  (Separate argument as to how much of each it should be doing.)
    While Apple slowly buys back shares, they will eventually take the company private if the buybacks continue long enough. This would remove all the “stock analysts” from the equation. Whether that ever comes to fruition or not, I am satisfied knowing that I own a slightly higher portion of the company each time they buy back shares, especially as I reinvest dividends.
    Just repurchasing shares will not end in taking the company private.  The company, which is valued on different factors by different types of investors (discounted cash flow, P/E multiple, revenue multiple, etc) will not change in value based upon fewer shares outstanding.  It will simply be concentrated into fewer hands, presumably, as long as most long-term shareholders like myself remain so and don’t reduce our stake.  It’s like the classic pizza pie analogy; a 16” pie is no bigger or smaller based upon how many pieces you might slice it into.  So for the company to take itself private it has the same hurdle regardless of the number of remaining shares exist, it’ll still need to go find hundreds of billions of dollars to make a tender offer for outstanding shares, and get the remaining holdouts who refuse that offer, to vote to go private.  
    edited December 2018
  • Reply 96 of 152
    gatorguygatorguy Posts: 24,285member
    gatorguy said:

    gatorguy said:
    carnegie said:
    gatorguy said:
    larryjw said:
    crowley said:
    jasenj1 said:
    My understanding is that buy backs are supposed to increase the value of the remaining shares. 
    No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

    If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

    Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

    In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 
    Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 
    The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

    Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.
    As a base premise you're assuming that the buybacks actually increased the value of their stock's cash value, for which the evidence is scant IMO. $250B and five years later and their tech brethren who did not (as aggressively if at all) resort to the same use of their cash have performed much the same if not better in the stock market AFAICT. In the five years Apple has been repurchasing/retiring their own shares they've averaged a return of roughly 190%. That compares to 560% for Amazon, and 195% return on Alphabet neither of whom aggressively pursued the same strategies for using their cash assets.

    Is there some evidence of how much Apple shares have been impacted dollarwise? is the price 15%, 25% higher, even more, than it would have been had the stock buybacks not occurred? If not is it possible (probable?) that the attempt at artificially manipulating demand via buybacks may not have been the most efficient way to return value to Apple stockholders? In a nutshell what has their "greater equity in the company" actually delivered for them?

    With such a glut of cash (IMO not unlike gorging on food because, well, you can), could Apple be better served in the long run by marginally reducing product costs which likely increases market share?
    You’re not controlling for variables.  The fact the Apple is so secretive affects its market valuation.  The fact of the history of the PC versus Mac and now iOS versus Android wars, which is really a story of one company going up against an entire industry of companies, with the latter applying far, far higher advertising and marketing budgets in aggregate to sway opinion away from the one wildcard outlier, this also affects market valuation.  The fact these other companies are story stocks, and Apple isn’t, affects its relative valuation.  You haven’t even attempted to mention these contributing factors, much less control for them.  You disappoint me on a level that transcends the lucidity of your comments.  It goes much deeper.  
    In essense I'm asking for any solid evidence of positive impacts on Apple stock prices directly due to the buybacks compared to if they had not occurred.

    You're writing a whole lotta words, and they do seem on the surface so authoritative and all,..
    But nothing you said answers even ONE of the questions I posed. Why bother trying to chide me if you don't any of the answers yourself? 

    I think I'll watch for Carnegie's reply instead. 
    That’s your M.O., to ask others to provide evidence to refute your counter factuals and ill-informed assertions.  I choose not to play your game.  Let’s see you provide evidence of your assertions, factoring for the variables you left out.  
    "Choose not to play my game"... lol
    I think if you knew any answers you'd post em.

    So which "assertions" would you like me provide evidence of? Very VERY honest question. I don't shy away from a good discussion, particularly if there's something to learn. 
    edited December 2018
  • Reply 97 of 152
    radarthekatradarthekat Posts: 3,855moderator
    gatorguy said:
    gatorguy said:

    gatorguy said:
    carnegie said:
    gatorguy said:
    larryjw said:
    crowley said:
    jasenj1 said:
    My understanding is that buy backs are supposed to increase the value of the remaining shares. 
    No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

    If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

    Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

    In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 
    Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 
    The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

    Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.
    As a base premise you're assuming that the buybacks actually increased the value of their stock's cash value, for which the evidence is scant IMO. $250B and five years later and their tech brethren who did not (as aggressively if at all) resort to the same use of their cash have performed much the same if not better in the stock market AFAICT. In the five years Apple has been repurchasing/retiring their own shares they've averaged a return of roughly 190%. That compares to 560% for Amazon, and 195% return on Alphabet neither of whom aggressively pursued the same strategies for using their cash assets.

    Is there some evidence of how much Apple shares have been impacted dollarwise? is the price 15%, 25% higher, even more, than it would have been had the stock buybacks not occurred? If not is it possible (probable?) that the attempt at artificially manipulating demand via buybacks may not have been the most efficient way to return value to Apple stockholders? In a nutshell what has their "greater equity in the company" actually delivered for them?

    With such a glut of cash (IMO not unlike gorging on food because, well, you can), could Apple be better served in the long run by marginally reducing product costs which likely increases market share?
    You’re not controlling for variables.  The fact the Apple is so secretive affects its market valuation.  The fact of the history of the PC versus Mac and now iOS versus Android wars, which is really a story of one company going up against an entire industry of companies, with the latter applying far, far higher advertising and marketing budgets in aggregate to sway opinion away from the one wildcard outlier, this also affects market valuation.  The fact these other companies are story stocks, and Apple isn’t, affects its relative valuation.  You haven’t even attempted to mention these contributing factors, much less control for them.  You disappoint me on a level that transcends the lucidity of your comments.  It goes much deeper.  
    In essense I'm asking for any solid evidence of positive impacts on Apple stock prices directly due to the buybacks compared to if they had not occurred.

    You're writing a whole lotta words, and they do seem on the surface so authoritative and all,..
    But nothing you said answers even ONE of the questions I posed. Why bother trying to chide me if you don't any of the answers yourself? 

    I think I'll watch for Carnegie's reply instead. 
    That’s you M.O., to ask others to provide evidence to refute your counter factuals and I’ll-informed assertions.  I choose not to play your game.  Let’s see you provide evidence of your assertions, factoring for the variables you left out.  
    "Choose not to play my game"... lol
    I think if you knew any answers you'd post em.

    So which "assertions" would you like me provide evidence of? Very VERY honest question. I don't shy away from a good discussion, particularly if there's something to learn. 
    A multi variant problem is by its nature intractable, and so it’s very doubtful either you or I could do the work to control for the many variables that determine how Apple is valued relative to the other companies you mentioned.  Which you should know, and therefore you should have known not to draw such a simplistic comparison between Apple’s share price increase and that of the other companies.  But you went ahead and did so anyway, which means you’re either playing to the naivety you assume exists in others here, or you don’t comprehend the factors that go into the valuation of businesses.  So here’s my honest question.  Which is it?  
    edited December 2018
  • Reply 98 of 152
    gatorguygatorguy Posts: 24,285member
    gatorguy said:
    gatorguy said:

    gatorguy said:
    carnegie said:
    gatorguy said:
    larryjw said:
    crowley said:
    jasenj1 said:
    My understanding is that buy backs are supposed to increase the value of the remaining shares. 
    No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

    If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

    Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

    In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 
    Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 
    The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

    Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.
    As a base premise you're assuming that the buybacks actually increased the value of their stock's cash value, for which the evidence is scant IMO. $250B and five years later and their tech brethren who did not (as aggressively if at all) resort to the same use of their cash have performed much the same if not better in the stock market AFAICT. In the five years Apple has been repurchasing/retiring their own shares they've averaged a return of roughly 190%. That compares to 560% for Amazon, and 195% return on Alphabet neither of whom aggressively pursued the same strategies for using their cash assets.

    Is there some evidence of how much Apple shares have been impacted dollarwise? is the price 15%, 25% higher, even more, than it would have been had the stock buybacks not occurred? If not is it possible (probable?) that the attempt at artificially manipulating demand via buybacks may not have been the most efficient way to return value to Apple stockholders? In a nutshell what has their "greater equity in the company" actually delivered for them?

    With such a glut of cash (IMO not unlike gorging on food because, well, you can), could Apple be better served in the long run by marginally reducing product costs which likely increases market share?
    You’re not controlling for variables.  The fact the Apple is so secretive affects its market valuation.  The fact of the history of the PC versus Mac and now iOS versus Android wars, which is really a story of one company going up against an entire industry of companies, with the latter applying far, far higher advertising and marketing budgets in aggregate to sway opinion away from the one wildcard outlier, this also affects market valuation.  The fact these other companies are story stocks, and Apple isn’t, affects its relative valuation.  You haven’t even attempted to mention these contributing factors, much less control for them.  You disappoint me on a level that transcends the lucidity of your comments.  It goes much deeper.  
    In essense I'm asking for any solid evidence of positive impacts on Apple stock prices directly due to the buybacks compared to if they had not occurred.

    You're writing a whole lotta words, and they do seem on the surface so authoritative and all,..
    But nothing you said answers even ONE of the questions I posed. Why bother trying to chide me if you don't any of the answers yourself? 

    I think I'll watch for Carnegie's reply instead. 
    That’s you M.O., to ask others to provide evidence to refute your counter factuals and I’ll-informed assertions.  I choose not to play your game.  Let’s see you provide evidence of your assertions, factoring for the variables you left out.  
    "Choose not to play my game"... lol
    I think if you knew any answers you'd post em.

    So which "assertions" would you like me provide evidence of? Very VERY honest question. I don't shy away from a good discussion, particularly if there's something to learn. 
    A multi variant problem is by its nature intractable, and so it’s very doubtful either you could do the work to control for the many variables that determine how Apple is valued relative to the other companies you mentioned.  Which you should know, and therefore you should have known not to draw Such a simplistic comparison between Apple’s share price increase and theirs.  But you went ahead and did so anyway, which means you’re either playing to he niavety you assume exists in others here, or you don’t comprehend the factors that go into the valuation of businesses.  So here’s my honest question.  Which is it?  
    Ummm, the "assertion" you're pointing out is that there's a lack of evidence how much or even if Apple's buyback program has benefited you as an Apple stockholder. It's certainly not on display if simply looking at the returns on other FAANG tech stocks.

    ...And if you believe the buybacks HAVE made a significant impact then just imagine how poorly your investment in them would have comparatively been if Apple hadn't spent a quarter-$Trillion propping it up. Do you honestly believe Apple would have been 2nd to worst choice among them if not for their stock repurchase program? 
  • Reply 99 of 152
    tmaytmay Posts: 6,367member
    gatorguy said:
    gatorguy said:
    gatorguy said:

    gatorguy said:
    carnegie said:
    gatorguy said:
    larryjw said:
    crowley said:
    jasenj1 said:
    My understanding is that buy backs are supposed to increase the value of the remaining shares. 
    No, obviously not, otherwise companies would just buy back shares all the time.  The only way to increase the value of shares it to get the market to recognise increasing value in the company.  What share buy backs do is express a clear signal of the company's faith that the shares are undervalued, and therefore worth buying.

    If the market believes the company (and all other things being equal), then more people want to buy shares, and the share value goes up.  If the market doesn't believe the company, or if other things (like for example, an idiot president) happen, then the share value may go down.

    Analysts saying it's a bad investment are day trading idiots who think that because they have the privilege of hindsight, they are somehow geniuses.  Given Apple's P/E it was a fine investment, that has been undercut in the short term by political events. 

    In theory, if the stock they bought was worth what they paid for it, the transaction was a wash -- they traded the cash asset for a stock asset. 
    Except that's not what Apple did. There was no asset trade, ie a share of stock, when Apple repurchased it. That share was retired, burned, and buried. It has no remaining book value. The money was spent in what amounts to an attempt to artificially manipulate the stock value, and each member of the executive management team reaps significant personal benefits monetarily from it. 
    The share is retired, in effect increasing the ownership in the company of each remaining shareholder. It's the same effect as if Apple had divided those repurchased shares up and distributed them to existing shareholders. Apple is buying an increased stake in the company on behalf of existing shareholders. They don't have to spend anything, yet they own more of the company - e.g., more of the liquidation value of the company or a larger share of the ongoing profits of the company.

    Apple is returning capital to shareholders in the form of additional equity in the company. If someone would prefer cash instead of greater equity in the company, they can sell the appropriate amount of shares. They'll own just as much of the company as they did before and have what is effectively a cash distribution. In this way they get to control the tax consequences, for them, of the capital return Apple is doing.
    As a base premise you're assuming that the buybacks actually increased the value of their stock's cash value, for which the evidence is scant IMO. $250B and five years later and their tech brethren who did not (as aggressively if at all) resort to the same use of their cash have performed much the same if not better in the stock market AFAICT. In the five years Apple has been repurchasing/retiring their own shares they've averaged a return of roughly 190%. That compares to 560% for Amazon, and 195% return on Alphabet neither of whom aggressively pursued the same strategies for using their cash assets.

    Is there some evidence of how much Apple shares have been impacted dollarwise? is the price 15%, 25% higher, even more, than it would have been had the stock buybacks not occurred? If not is it possible (probable?) that the attempt at artificially manipulating demand via buybacks may not have been the most efficient way to return value to Apple stockholders? In a nutshell what has their "greater equity in the company" actually delivered for them?

    With such a glut of cash (IMO not unlike gorging on food because, well, you can), could Apple be better served in the long run by marginally reducing product costs which likely increases market share?
    You’re not controlling for variables.  The fact the Apple is so secretive affects its market valuation.  The fact of the history of the PC versus Mac and now iOS versus Android wars, which is really a story of one company going up against an entire industry of companies, with the latter applying far, far higher advertising and marketing budgets in aggregate to sway opinion away from the one wildcard outlier, this also affects market valuation.  The fact these other companies are story stocks, and Apple isn’t, affects its relative valuation.  You haven’t even attempted to mention these contributing factors, much less control for them.  You disappoint me on a level that transcends the lucidity of your comments.  It goes much deeper.  
    In essense I'm asking for any solid evidence of positive impacts on Apple stock prices directly due to the buybacks compared to if they had not occurred.

    You're writing a whole lotta words, and they do seem on the surface so authoritative and all,..
    But nothing you said answers even ONE of the questions I posed. Why bother trying to chide me if you don't any of the answers yourself? 

    I think I'll watch for Carnegie's reply instead. 
    That’s you M.O., to ask others to provide evidence to refute your counter factuals and I’ll-informed assertions.  I choose not to play your game.  Let’s see you provide evidence of your assertions, factoring for the variables you left out.  
    "Choose not to play my game"... lol
    I think if you knew any answers you'd post em.

    So which "assertions" would you like me provide evidence of? Very VERY honest question. I don't shy away from a good discussion, particularly if there's something to learn. 
    A multi variant problem is by its nature intractable, and so it’s very doubtful either you could do the work to control for the many variables that determine how Apple is valued relative to the other companies you mentioned.  Which you should know, and therefore you should have known not to draw Such a simplistic comparison between Apple’s share price increase and theirs.  But you went ahead and did so anyway, which means you’re either playing to he niavety you assume exists in others here, or you don’t comprehend the factors that go into the valuation of businesses.  So here’s my honest question.  Which is it?  
    Ummm, the "assertion" you're pointing out is that there's a lack of evidence how much or even if Apple's buyback program has benefited you as an Apple stockholder. It's certainly not on display if simply looking at the returns on other FAANG tech stocks.

    ...And if you believe the buybacks HAVE made a significant impact then just imagine how poorly your investment in them would have comparatively been if Apple hadn't spent a quarter-$Trillion propping it up. Do you honestly believe Apple would have been 2nd to worst choice among them if not for their stock repurchase program? 

    https://www.nytimes.com/2018/08/01/business/dealbook/apple-stock-buybacks.html

    "That added to its already record level of returning capital to investors. No company has bought back more shares since 2012 than Apple. It has repurchased almost $220 billion of its own stock since it announced in March 2012 that it would start to buy back shares. That is roughly equivalent to the market value of Verizon Communications. Over that period, the number of Apple’s shares outstanding has dropped by just over a quarter.

    Like most stock repurchase efforts, Apple’s buyback program has helped bolster its share price in recent years. Apple shares are up 18 percent this year and nearly 150 percent since March 2012. By reducing the number of shares on the market, buybacks also lift a company’s earnings per share — a key metric for investors. For instance, Apple’s earning per share grew 40 percent last quarter compared with the same period last year, while its net income rose just 32 percent.

    Apple’s buyback binge also affects the calculation of its stock market value, which is approaching $1 trillion. Based on its share count from its fiscal second-quarter filing, the company would have a market value of $984 billion Wednesday. But Apple reduced its share count by 5.5 percent during its fiscal third quarter ending June 30. That means Apple’s market capitalization stands at roughly $970 billion, and its shares now need to hit $206.49 for the company to be valued at $1 trillion."

    Who knows how effective buybacks will be over the next seven years, but I'm guessing that Apple isn't "doomed" and investors holding, and others buying. in this trough, are likely not cowed by the current stock price, and looking forward to those dividends.


    radarthekat
  • Reply 100 of 152
    carnegie said:
    Apple didn't start paying large dividends or make stock buy backs because they had excess cash.   They did it because activist share holders like Carl Icahn forced them to.   It was not a "business decision".
    You claim to know something but it just does not hold up at all. Icahn had less than 1% of the company. Totally irrelevant. He also sold in 2016 when he had some profit and missed a 100% gain since then. In 2018, Apple increased the buybacks more than twofold and said it planned to get to cash neutral in the future. There was no pressure, they clearly judge it to be the best use of the money to create shareholder value.
    It was definitely Icahn who fought that battle and got the ball rolling.   But you are correct that he later sold out and the recent share buybacks and dividends have been all Apple's doing -- especially passing on the money from the tax scam to the shareholders.

    I was pointing out that, without Icahn, Apple would likely still be in the mode of reinvesting its profits rather than distributing them.   But, who knows?  It might have happened anyway.
    Reinvesting them in corporate bonds (i.e. loaning them to other corporations), U.S. Treasuries, mortgage-backed securities, and other such instruments? That's what it was doing with the profits it's now returning to shareholders through stock buybacks.

    I'm not generally a fan of (non-closely-held) corporations returning capital to shareholders. I think, broad strokes, the point of equity investment is that one believes that the corporations they're investing in make better use of that capital than one will themselves. There are lots of reasons why one might think that. But that's why you give corporations your capital (or give it to others who previously gave theirs to corporations). If you want your capital back, hopefully with a profit, you sell your shares.

    But a corporation can get to the point that it has so much retained profit that it makes sense to distribute it to shareholders. Apple reached that point some time ago. It wasn't going to throw an extra $20 or 30 billion a year into R&D just because, just because it had the money to do so. It reinvests (in the going concern) that which it thinks makes sense to invest, without regard for how much extra money it has accumulated. To do otherwise would be foolish. And spending large sums on acquisitions just because you have the money to do so would also be foolish.

    So what to do with a huge pile of cash? You keep what you reasonably think you might have need going forward, and you return the rest to shareholders. Apple would almost certainly have done that regardless of what activist investors (holding very modest portions of the company's equity) advocated for. It reached a point when it could no longer justify holding onto all of the cash it had accumulated, investing it in low-return similar-to-cash instruments. Small-ish dividends are okay, but - all things considered - the better way of returning large sums to shareholders is through buybacks. (I'm happy to discuss why that is.) So, if Apple thought its stock was undervalued, then it made sense to buy back shares.

    As for "passing on the money from the tax scam to shareholders": The money Apple has been returning to shareholders isn't from the tax law changes of 2017. It's profit that Apple has made over the last decade or so. It's profit on which it now has to pay more U.S. income taxes than it otherwise would have had to (i.e. without those tax law changes).
    Your namesake's company ultimately (as U.S. Steel) thought the same thing:  "We have too much cash, we can give it away".  And, largely because they failed to reinvest into their business, they could no longer compete and failed.

    As for the excess cash for the 2018 buybacks -- most came from the tax scam.   But Apple was far from alone on that one.  Interesting point on that one though:   Trump just announced the country can't afford to give government workers raises in 2019 -- I guess they gave it all away to Apple Shareholders. 

    edited December 2018
Sign In or Register to comment.