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

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  • Reply 101 of 152
    tmaytmay Posts: 6,371member
    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. 

    Nice straw man.

    Apple's buybacks are in effect, and the direct result of, the Administration's repatriation plan. The lack of those government raises is the result of the Administration, not Apple,

    Again, I would ask how you believe Apple should invest that excess cash.
    edited December 2018
  • Reply 102 of 152
    gatorguygatorguy Posts: 24,286member
    tmay said:
    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.


    No doubt you see the writers cause and effect flaw almost immediately, right Tmay?

    He notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. The evidence he provides? Apple shares up 18% this year, and 150% since 2012. That's far short of being proof of anything directly connected to the share price increase he touts.  Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all proof that the buyback program has been the reason behind it and therefor a pretty effective use of the cash is it? 
    edited December 2018 GeorgeBMac
  • Reply 103 of 152
    tmaytmay Posts: 6,371member
    gatorguy said:
    tmay said:
    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.


    No doubt you see the flaw almost immediately Tmay, correct?

    The writer notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. His evidence? Apple shares up 18% this year, and 150% since 2012. Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all evidence that it's due to the to the buyback program is it? 
    Gee, if only Amazon and Alphabet were the same business models as Apple...

    One is an advertising / search company, and the other is a web service provider, with the add on benefit of purveying just about anything at low margins. 

    Sure, stock price growth is great for Alphabet and Amazon, yet value investors are still smitten with Apple; obviously, they see something that you don't.

    BTW, Apple being valued like a Steel Mill, as it has been for years, drives investors crazy, and I'm sure that those gaming Apple have moved on. 

    https://www.aboveavalon.com/notes/2018/12/3/leveraging-apples-share-buyback
    edited December 2018
  • Reply 104 of 152
    gatorguygatorguy Posts: 24,286member
    tmay said:
    gatorguy said:
    tmay said:
    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.


    No doubt you see the flaw almost immediately Tmay, correct?

    The writer notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. His evidence? Apple shares up 18% this year, and 150% since 2012. Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all evidence that it's due to the to the buyback program is it? 
    Gee, if only Amazon and Alphabet were the same business models as Apple...

    One is an advertising / search company, and the other is a web service provider, with the add on benefit of purveying just about anything at low margins. 

    Sure, stock price growth is great for Alphabet and Amazon, yet value investors are still smitten with Apple; obviously, they see something that you don't.

    BTW, Apple being valued like a Steel Mill, as it has been for years, drives investors crazy, and I'm sure that those gaming Apple have moved on. 

    https://www.aboveavalon.com/notes/2018/12/3/leveraging-apples-share-buyback
    So then you agree that there's no evidence you're aware of that the stock repurchase program has been an effective use of Apple cash? The article ascribing the "150% return" (I thought it was more)  as a direct result of the program isn't it. Simply saying if this/then that doesn't make it evidence IMO, as you yourself are pointing out. 
    GeorgeBMac
  • Reply 105 of 152
    tmaytmay Posts: 6,371member
    gatorguy said:
    tmay said:
    gatorguy said:
    tmay said:
    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.


    No doubt you see the flaw almost immediately Tmay, correct?

    The writer notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. His evidence? Apple shares up 18% this year, and 150% since 2012. Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all evidence that it's due to the to the buyback program is it? 
    Gee, if only Amazon and Alphabet were the same business models as Apple...

    One is an advertising / search company, and the other is a web service provider, with the add on benefit of purveying just about anything at low margins. 

    Sure, stock price growth is great for Alphabet and Amazon, yet value investors are still smitten with Apple; obviously, they see something that you don't.

    BTW, Apple being valued like a Steel Mill, as it has been for years, drives investors crazy, and I'm sure that those gaming Apple have moved on. 

    https://www.aboveavalon.com/notes/2018/12/3/leveraging-apples-share-buyback
    So then you agree that there's no evidence you're aware of that the stock repurchase program has been an effective use of Apple cash? The article ascribing the "150% return" (I thought it was more)  as a direct result of the program isn't it. Simply saying if this/then that doesn't make it evidence IMO, as you yourself are pointing out. 
    Read the link or not, that's up to you.

    The buybacks are a good use of the excess cash, given that Apple is able to expand its operation off its free cash, and given that Apple doesn't do M&A.

    Your idea to lower prices to gain marketshare is not something that I see as appropriated for Apple at this time.

    Here's a take a Google's business model;

    https://medium.com/s/which-half-is-wasted/googles-350-billion-haircut-fa1a0f33ace1
    edited December 2018
  • Reply 106 of 152
    gatorguygatorguy Posts: 24,286member
    tmay said:
    gatorguy said:
    tmay said:
    gatorguy said:
    tmay said:
    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.


    No doubt you see the flaw almost immediately Tmay, correct?

    The writer notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. His evidence? Apple shares up 18% this year, and 150% since 2012. Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all evidence that it's due to the to the buyback program is it? 
    Gee, if only Amazon and Alphabet were the same business models as Apple...

    One is an advertising / search company, and the other is a web service provider, with the add on benefit of purveying just about anything at low margins. 

    Sure, stock price growth is great for Alphabet and Amazon, yet value investors are still smitten with Apple; obviously, they see something that you don't.

    BTW, Apple being valued like a Steel Mill, as it has been for years, drives investors crazy, and I'm sure that those gaming Apple have moved on. 

    https://www.aboveavalon.com/notes/2018/12/3/leveraging-apples-share-buyback
    So then you agree that there's no evidence you're aware of that the stock repurchase program has been an effective use of Apple cash? The article ascribing the "150% return" (I thought it was more)  as a direct result of the program isn't it. Simply saying if this/then that doesn't make it evidence IMO, as you yourself are pointing out. 
    Read the link or not, that's up to you.

    The buybacks are a good use of the excess cash, given that Apple is able to expand its operation off its free cash, and given that Apple doesn't do M&A.
    Of course I read the link. How would I be quoting from it if I didn't?
    The writer didn't offer anything for evidence as you realize now. If he had you'd be pointing it out for me. Did I miss it? 
    edited December 2018 GeorgeBMac
  • Reply 107 of 152
    tmaytmay Posts: 6,371member
    gatorguy said:
    tmay said:
    gatorguy said:
    tmay said:
    gatorguy said:
    tmay said:
    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.


    No doubt you see the flaw almost immediately Tmay, correct?

    The writer notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. His evidence? Apple shares up 18% this year, and 150% since 2012. Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all evidence that it's due to the to the buyback program is it? 
    Gee, if only Amazon and Alphabet were the same business models as Apple...

    One is an advertising / search company, and the other is a web service provider, with the add on benefit of purveying just about anything at low margins. 

    Sure, stock price growth is great for Alphabet and Amazon, yet value investors are still smitten with Apple; obviously, they see something that you don't.

    BTW, Apple being valued like a Steel Mill, as it has been for years, drives investors crazy, and I'm sure that those gaming Apple have moved on. 

    https://www.aboveavalon.com/notes/2018/12/3/leveraging-apples-share-buyback
    So then you agree that there's no evidence you're aware of that the stock repurchase program has been an effective use of Apple cash? The article ascribing the "150% return" (I thought it was more)  as a direct result of the program isn't it. Simply saying if this/then that doesn't make it evidence IMO, as you yourself are pointing out. 
    Read the link or not, that's up to you.

    The buybacks are a good use of the excess cash, given that Apple is able to expand its operation off its free cash, and given that Apple doesn't do M&A.
    Of course I read the link. How would I be quoting from it if I didn't?
    The writer didn't offer anything for evidence as you realize now. If he had you'd be pointing it out for me. Did I miss it? 
    Cool.

    So you get the win.

    Yeah!
  • Reply 108 of 152
    gatorguygatorguy Posts: 24,286member
    tmay said:
    gatorguy said:
    tmay said:
    gatorguy said:
    tmay said:
    gatorguy said:
    tmay said:
    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.


    No doubt you see the flaw almost immediately Tmay, correct?

    The writer notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. His evidence? Apple shares up 18% this year, and 150% since 2012. Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all evidence that it's due to the to the buyback program is it? 
    Gee, if only Amazon and Alphabet were the same business models as Apple...

    One is an advertising / search company, and the other is a web service provider, with the add on benefit of purveying just about anything at low margins. 

    Sure, stock price growth is great for Alphabet and Amazon, yet value investors are still smitten with Apple; obviously, they see something that you don't.

    BTW, Apple being valued like a Steel Mill, as it has been for years, drives investors crazy, and I'm sure that those gaming Apple have moved on. 

    https://www.aboveavalon.com/notes/2018/12/3/leveraging-apples-share-buyback
    So then you agree that there's no evidence you're aware of that the stock repurchase program has been an effective use of Apple cash? The article ascribing the "150% return" (I thought it was more)  as a direct result of the program isn't it. Simply saying if this/then that doesn't make it evidence IMO, as you yourself are pointing out. 
    Read the link or not, that's up to you.

    The buybacks are a good use of the excess cash, given that Apple is able to expand its operation off its free cash, and given that Apple doesn't do M&A.
    Of course I read the link. How would I be quoting from it if I didn't?
    The writer didn't offer anything for evidence as you realize now. If he had you'd be pointing it out for me. Did I miss it? 
    Cool.

    So you get the win.

    Yeah!
    The discussion isn't a win for anybody unless we come away with a better understanding. That's why I ask questions. You may be perfectly comfortable with accepting it all on faith which is fine. When something peaks my interest I generally research it. Sometimes a lot

    So I don't want to "win", I want to understand it better. Heck, "winning" is what keeps some posters here from ever admitting they might be wrong, new thoughts needed. You're not helping when you make it out to be a personal contest instead, right? 



    edited December 2018 GeorgeBMacavon b7
  • Reply 109 of 152
    carnegiecarnegie Posts: 1,078member
    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. 

    Apple reinvests in its business. Do you think a company should spend money just to do so? Or should it only spend money (i.e. as reinvestment in its business) which it thinks makes sense? And then what should it do with what's left, when it becomes a huge amount? Invest it in cash-like instruments that return 2% or so indefinitely?

    And, again... the money Apple has been returning to shareholders didn't mostly come from what you're referring to as the tax scam. The U.S. government hasn't given Apple money. That money represents profits Apple has made over the years. It was returning those profits to investors at an extraordinary rate even before the tax law changes of 2017. The tax law changes actually mean that Apple has to pay more on those retained profits from years passed than it otherwise would have had to.
    radarthekat
  • Reply 110 of 152
    carnegiecarnegie Posts: 1,078member
    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?  
    I had already replied. The question is, if Apple had around $240 billion more in net cash right now, how would the market value it? How much greater would Apple's market cap be? What about back in October when AAPL was at its peak? How much greater would Apple's market cap have been? The (conjectural) answer to that question gives us the clearest indication of the effects of the buybacks on Apple's stock price that we're going to get.

    A counterfactual is just that. We can't know with certainty what would have happened if what did happen hadn't happened. We can only think of such alternate timelines in probabilistic terms. We can use our understandings of how things work to consider what's more or less likely. I can't know for sure what would have happened if I'd have dropped the wine glass I was holding instead of placing it on a table. But my understanding of gravity and the fragility of glass (of different types) might lead me to believe it's very likely that the wine glass would have shattered. I can't know for sure that, had Apple not repurchased shares, we wouldn't be in the midst of a nuclear war right now. It's possible that, in that alternate timeline, a chain of events would have played out that lead to that. I think that's quite unlikely though.

    It's also possible that things could have happened which would have lead to its stock price being higher or lower right now. We just can't know, we can only access likelihoods. We can't really account for random stuff when making that assessment (e.g. how John Doe from Peoria, Vermont might have acted differently - would he have bought lots of AAPL, sold lots of it, gotten made and bombed an Apple store?). But we can look at certain direct effects of the buybacks, and weigh the differences which are more easily understood to result from the buybacks.

    Apple now has around $240 billion less in cash because it did the buybacks. And there are about 30% fewer shares outstanding because it did the buybacks. So, to be at the same share price, its market cap would need to be about $325 billion higher than it is right now. At its peak in October, its market cap would have needed to be about $500 billion higher than it was in order for the share price to be the same. If Apple, instead of having fewer shares, had the money it spent buying back shares (accounting for other direct effects such as increased interest payments and reduced dividend payments), by how much more would the market value the company now?
  • Reply 111 of 152
    radarthekatradarthekat Posts: 3,857moderator
    gatorguy said:
    tmay said:
    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.


    No doubt you see the writers cause and effect flaw almost immediately, right Tmay?

    He notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. The evidence he provides? Apple shares up 18% this year, and 150% since 2012. That's far short of being proof of anything directly connected to the share price increase he touts.  Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all proof that the buyback program has been the reason behind it and therefor a pretty effective use of the cash is it? 
    The flaw is exactly that.  One cannot point to the share repurchases and draw any conclusion regarding how they affected the stock price.  There are just too many other factors.  Would we even begin with the current share price?  Why not the $230+ Apple was at before the ridiculous market reaction to Apple announcing it will no longer report unit sales volumes for iPhone, iPad and Mac?  Could anyone suggest that drop in share price was a result of the share repurchases? I hope not, as it’s clear the drop was based upon other factors, and it’s those factors that muddy the picture.  

    After that drop the whole market fell apart and Apple and everything else dropped a lot more through late November and December.  That swoon was also not the result of Apple’s share repurchases.  Couldn’t have been, as it played out across the entire market.  Taking out those two factors, we’d have to evaluate at Apple’s share price of around $230.  But could we say the share repurchases were solely responsible for driving it to that height?  What about the great success of the more expensive iPhone X sales over the previous year, resulting in some 30% higher iPhone revenue on flat unit sales?  Might that factor have weighed in on the stock movement?  Of course it did.  So how can we isolate the share repurchases?  We simply  cannot.  

    But what we can say is that long-term holders who have not altered their position in the stock today own meaningfully more of the company’s future revenue and profit streams than they did prior to the share repurchases.  And that’s why share repurchases are characterized as providing value to shareholders.  We cannot accurately measure the effects of share repurchases over short-term periods because they are only one factor affecting the stock price.   The share repurchases are likely not even the most significant factor.  Investor sentiment is likely the most significant factor in the short-term, and it therefore takes a very long time indeed to isolate even an estimate of the effect of share repurchases.  

    But there is one effect we can somewhat isolate, because we can see it in action, and that is the effect on dividends.  Apple has held the absolute amount paid out in dividends at about $10-12 billion annually for years.  The company has increased the dividend in lock-step with share repurchase volumes, increasing the dividend by a percentage each year that maintains the absolute amount paid out at that same level.  So the more shares the company retires, the more the dividend is raised that year to maintain the overall payout amount in dollars.  This benefits us shareholders with, as another poster characterized them, gold-standard dividend raises.  

    The rest of the effect of the share repurchases (each remaining share representing a larger share of future earnings), will take care of itself over time.  In short, share repurchases simply aren’t about affecting the share price in the short-term or near-term. They are about enhancing the holdings of the company’s persistent investors.  This is very long-term think, not trader-think.  Only traders, market timers, and novices concern themselves with attempts to suss out the immediate effects of such strategies.  Think Different.

    I hope you understand that sometimes I have to wait in our conversations until your thinking evolves to a point where what I have to say can make sense to you.  There’s little point in me digging down to the essence of the matter prior to that.   
    edited December 2018 tmay
  • Reply 112 of 152
    GeorgeBMacGeorgeBMac Posts: 11,421member
    tmay said:
    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. 

    Nice straw man.

    Apple's buybacks are in effect, and the direct result of, the Administration's repatriation plan. The lack of those government raises is the result of the Administration, not Apple,

    Again, I would ask how you believe Apple should invest that excess cash.
    No strawman -- but instead, you need to pay attention.   The government gave the money meant to pay America's bills (such as the raises to federal workers) to Apple and others corporations -- who, instead of investing it, gave it away to stock holders.   It was a form of money laundering.   So, federal workers got robbed.   So who will be next?   Medicare recipients?   Republican leaders have already said they need to rob that program to pay for their tax scam.
  • Reply 113 of 152
    gatorguygatorguy Posts: 24,286member
    @carnegie ;
    I had not seen your previous reply until prompted by this latest one. I'm not certain if it was there before I began typing my reply to Radar, so apologies for asking for it again.

    I generally agree with you that trying to "revise history" in order to compare the outcome of two different actions also would fail at proving which was the better path. Combined with my own reading on the matter I'll accept your opinion as well that there's no clear answer as to what specific effect the stock buybacks have had on the price of Apple's stock today. Could there have been a "better" way to reward investors. You and I seem to agree there might have been but there's no clan way to investigate other paths not taken.

    Regarding questions about the benefits of increasing workers pay, investment in plant and infrastructure, even reducing executive compensation, rather than using essentially "trickle down theory" from the top 1% as the best way to drive our economy forward: I'm in the former camp. IMO the financial instrument driven economy we've embraced has led to even more class-separation and wage disparity.

    BTW, before I continue I completely understand that no one is guaranteed a healthy life, a warm home, hot food or clean water so I absolutely do not endorse a welfare state and the traps that come with it. 

    But I also personally believe when an ever smaller percentage of our citizens control a majority of the economic assets of our country that the choices they make will increasingly favor those around them and in similar circumstances,to the detriment of others who by birth, location, or other factors not of their making are not considered.

    Playing the long game the current hoarding of assets, and the drive for more "profits" for nothing more than profits sake and at any cost will at some point become untenable, It has before, and often, relegating entire societies to no more than case studies in a classroom while almost no one pays attention to the teacher.

    The traditional US economic drivers are being supplanted, the most basic infrastructure is long past its expiration date in large parts of the country, social programs intended to prevent just the type of suffering we saw in this country during the Great Depression are on the verge of failing, and ever larger percentages of our assets are being amassed by an ever smaller percentage of the populace and that small segment holding the pursestrings has chosen to push payment down the road for someone else to deal with. Instead they pillage the fields for whatever assets our country's farmers and factory owners and stores and transportation companies managed to accumulate over the past 250 years and planting an inferior field of paper unable to advance the US economy as a whole (and our political influence along with it) as replacement...

    Corporate profits cannot continue seizing ever larger percentages of our GDP without repercussions. By definition if one segment goes up other segments must suffer in comparison and in the US that has been the wage segment which has fallen significantly over the years. 
     
    "Once you've taken care of yourself and your children, the best use of extra wealth is to give it back to society."
    Bill Gates. 

    He and Warren Buffett are both wise enough to recognise that the support structure that enabled them to prosper far beyond their needs must be replenished for it to continue. They are giving back what they don't need for the betterment of the society that supported them and their dreams.

    IMHO profit for profits sake will eventually kill the dreams for too many people and the tipping point will be reached...

    End of diatribe. 

    edited December 2018 GeorgeBMacmuthuk_vanalingam
  • Reply 114 of 152
    tmaytmay Posts: 6,371member
    tmay said:
    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. 

    Nice straw man.

    Apple's buybacks are in effect, and the direct result of, the Administration's repatriation plan. The lack of those government raises is the result of the Administration, not Apple,

    Again, I would ask how you believe Apple should invest that excess cash.
    No strawman -- but instead, you need to pay attention.   The government gave the money meant to pay America's bills (such as the raises to federal workers) to Apple and others corporations -- who, instead of investing it, gave it away to stock holders.   It was a form of money laundering.   So, federal workers got robbed.   So who will be next?   Medicare recipients?   Republican leaders have already said they need to rob that program to pay for their tax scam.

    https://www.npr.org/2017/12/19/571754894/charts-see-how-much-of-gop-tax-cuts-will-go-to-the-middle-class

    You probably don't remember the tax cut of 2017; most people don't because the effect was so minor. Given that the wealthiest benefited most from the legislation, would you now find a way to blame Apple for the current revenue shortfalls from that legislation? 
  • Reply 115 of 152
    tmaytmay Posts: 6,371member

    gatorguy said:
    @carnegie ;
    I had not seen your previous reply until prompted by this latest one. I'm not certain if it was there before I began typing my reply to Radar, so apologies for asking for it again.

    I generally agree with you that trying to "revise history" in order to compare the outcome of two different actions also would fail at proving which was the better path. Combined with my own reading on the matter I'll accept your opinion as well that there's no clear answer as to what specific effect the stock buybacks have had on the price of Apple's stock today. Could there have been a "better" way to reward investors. You and I seem to agree there might have been but there's no clan way to investigate other paths not taken.

    Regarding questions about the benefits of increasing workers pay, investment in plant and infrastructure, even reducing executive compensation, rather than using essentially "trickle down theory" from the top 1% as the best way to drive our economy forward: I'm in the former camp. IMO the financial instrument driven economy we've embraced has led to even more class-separation and wage disparity.

    BTW, before I continue I completely understand that no one is guaranteed a healthy life, a warm home, hot food or clean water so I absolutely do not endorse a welfare state and the traps that come with it. 

    But I also personally believe when an ever smaller percentage of our citizens control a majority of the economic assets of our country that the choices they make will increasingly favor those around them and in similar circumstances,to the detriment of others who by birth, location, or other factors not of their making are not considered.

    Playing the long game the current hoarding of assets, and the drive for more "profits" for nothing more than profits sake and at any cost will at some point become untenable, It has before, and often, relegating entire societies to no more than case studies in a classroom while almost no one pays attention to the teacher.

    The traditional US economic drivers are being supplanted, the most basic infrastructure is long past its expiration date in large parts of the country, social programs intended to prevent just the type of suffering we saw in this country during the Great Depression are on the verge of failing, and ever larger percentages of our assets are being amassed by an ever smaller percentage of the populace and that small segment holding the pursestrings has chosen to push payment down the road for someone else to deal with. Instead they pillage the fields for whatever assets our country's farmers and factory owners and stores and transportation companies managed to accumulate over the past 250 years and planting an inferior field of paper unable to advance the US economy as a whole (and our political influence along with it) as replacement...

    Corporate profits cannot continue seizing ever larger percentages of our GDP without repercussions. By definition if one segment goes up other segments must suffer in comparison and in the US that has been the wage segment which has fallen significantly over the years. 
     
    "Once you've taken care of yourself and your children, the best use of extra wealth is to give it back to society."
    Bill Gates. 

    He and Warren Buffett are both wise enough to recognise that the support structure that enabled them to prosper far beyond their needs must be replenished for it to continue. They are giving back what they don't need for the betterment of the society that supported them and their dreams.

    IMHO profit for profits sake will eventually kill the dreams for too many people and the tipping point will be reached...

    End of diatribe. 

    I'm puzzled that you appear to blame Apple for the very legislation that allows Apple to both repatriate its cash, and utilize it for the benefit of it's shareholders.

    Do the American people not take responsibility for electing Congress that created that legislation? 

    If reinvestment with that repatriated cash was important, why was there no legislation in place to force that to happen?

    Seems like Apple has been upgraded to the fourth branch of government, and is expected disburse its funds to directly benefit the people of the U.S.. not the shareholders.
  • Reply 116 of 152
    tmaytmay Posts: 6,371member

    gatorguy said:
    tmay said:
    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.


    No doubt you see the writers cause and effect flaw almost immediately, right Tmay?

    He notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. The evidence he provides? Apple shares up 18% this year, and 150% since 2012. That's far short of being proof of anything directly connected to the share price increase he touts.  Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all proof that the buyback program has been the reason behind it and therefor a pretty effective use of the cash is it? 
    The flaw is exactly that.  One cannot point to the share repurchases and draw any conclusion regarding how they affected the stock price.  There are just too many other factors.  Would we even begin with the current share price?  Why not the $230+ Apple was at before the ridiculous market reaction to Apple announcing it will no longer report unit sales volumes for iPhone, iPad and Mac?  Could anyone suggest that drop in share price was a result of the share repurchases? I hope not, as it’s clear the drop was based upon other factors, and it’s those factors that muddy the picture.  

    After that drop the whole market fell apart and Apple and everything else dropped a lot more through late November and December.  That swoon was also not the result of Apple’s share repurchases.  Couldn’t have been, as it played out across the entire market.  Taking out those two factors, we’d have to evaluate at Apple’s share price of around $230.  But could we say the share repurchases were solely responsible for driving it to that height?  What about the great success of the more expensive iPhone X sales over the previous year, resulting in some 30% higher iPhone revenue on flat unit sales?  Might that factor have weighed in on the stock movement?  Of course it did.  So how can we isolate the share repurchases?  We simply  cannot.  

    But what we can say is that long-term holders who have not altered their position in the stock today own meaningfully more of the company’s future revenue and profit streams than they did prior to the share repurchases.  And that’s why share repurchases are characterized as providing value to shareholders.  We cannot accurately measure the effects of share repurchases over short-term periods because they are only one factor affecting the stock price.   The share repurchases are likely not even the most significant factor.  Investor sentiment is likely the most significant factor in the short-term, and it therefore takes a very long time indeed to isolate even an estimate of the effect of share repurchases.  

    But there is one effect we can somewhat isolate, because we can see it in action, and that is the effect on dividends.  Apple has held the absolute amount paid out in dividends at about $10-12 billion annually for years.  The company has increased the dividend in lock-step with share repurchase volumes, increasing the dividend by a percentage each year that maintains the absolute amount paid out at that same level.  So the more shares the company retires, the more the dividend is raised that year to maintain the overall payout amount in dollars.  This benefits us shareholders with, as another poster characterized them, gold-standard dividend raises.  

    The rest of the effect of the share repurchases (each remaining share representing a larger share of future earnings), will take care of itself over time.  In short, share repurchases simply aren’t about affecting the share price in the short-term or near-term. They are about enhancing the holdings of the company’s persistent investors.  This is very long-term think, not trader-think.  Only traders, market timers, and novices concern themselves with attempts to suss out the immediate effects of such strategies.  Think Different.

    I hope you understand that sometimes I have to wait in our conversations until your thinking evolves to a point where what I have to say can make sense to you.  There’s little point in me digging down to the essence of the matter prior to that.   
    Gatorguy is stuck on comparing Apple to Alphabet and Amazon; that's certainly flawed, especially given that Apple will be implementing buybacks for another seven years, and neither of those other companies had much cash to repatriate. That makes Apple the outlier of the comparison. Did I mention that neither of those companies pay dividends, nor should they with their business models?

    Given that Apple is a company that often demonstrates punctuated equilibrium, a theory of an evolutionary mechanism, its stock will most often be considered as a steel mill, punctuated with periods of impressive growth. Attempting to determine the efficiency of buybacks over a partial period of time, is most certainly flawed, and given Apple's internal roadmap, buybacks would appear to be quite efficient for the shareholders, given no other viable alternatives to reduce Apple's cash.

    The best case for Apple is to purchase and retire shares at less than market value, which looks to be happening through the first couple of quarters of 2019. Attempting to compare stock values today between Apple and Alphabet/Amazon, isn't going to be very useful.


    edited December 2018
  • Reply 117 of 152
    gatorguygatorguy Posts: 24,286member
    tmay said:

    gatorguy said:
    @carnegie ;
    I had not seen your previous reply until prompted by this latest one. I'm not certain if it was there before I began typing my reply to Radar, so apologies for asking for it again.

    I generally agree with you that trying to "revise history" in order to compare the outcome of two different actions also would fail at proving which was the better path. Combined with my own reading on the matter I'll accept your opinion as well that there's no clear answer as to what specific effect the stock buybacks have had on the price of Apple's stock today. Could there have been a "better" way to reward investors. You and I seem to agree there might have been but there's no clan way to investigate other paths not taken.

    Regarding questions about the benefits of increasing workers pay, investment in plant and infrastructure, even reducing executive compensation, rather than using essentially "trickle down theory" from the top 1% as the best way to drive our economy forward: I'm in the former camp. IMO the financial instrument driven economy we've embraced has led to even more class-separation and wage disparity.

    BTW, before I continue I completely understand that no one is guaranteed a healthy life, a warm home, hot food or clean water so I absolutely do not endorse a welfare state and the traps that come with it. 

    But I also personally believe when an ever smaller percentage of our citizens control a majority of the economic assets of our country that the choices they make will increasingly favor those around them and in similar circumstances,to the detriment of others who by birth, location, or other factors not of their making are not considered.

    Playing the long game the current hoarding of assets, and the drive for more "profits" for nothing more than profits sake and at any cost will at some point become untenable, It has before, and often, relegating entire societies to no more than case studies in a classroom while almost no one pays attention to the teacher.

    The traditional US economic drivers are being supplanted, the most basic infrastructure is long past its expiration date in large parts of the country, social programs intended to prevent just the type of suffering we saw in this country during the Great Depression are on the verge of failing, and ever larger percentages of our assets are being amassed by an ever smaller percentage of the populace and that small segment holding the pursestrings has chosen to push payment down the road for someone else to deal with. Instead they pillage the fields for whatever assets our country's farmers and factory owners and stores and transportation companies managed to accumulate over the past 250 years and planting an inferior field of paper unable to advance the US economy as a whole (and our political influence along with it) as replacement...

    Corporate profits cannot continue seizing ever larger percentages of our GDP without repercussions. By definition if one segment goes up other segments must suffer in comparison and in the US that has been the wage segment which has fallen significantly over the years. 
     
    "Once you've taken care of yourself and your children, the best use of extra wealth is to give it back to society."
    Bill Gates. 

    He and Warren Buffett are both wise enough to recognise that the support structure that enabled them to prosper far beyond their needs must be replenished for it to continue. They are giving back what they don't need for the betterment of the society that supported them and their dreams.

    IMHO profit for profits sake will eventually kill the dreams for too many people and the tipping point will be reached...

    End of diatribe. 

    I'm puzzled that you appear to blame Apple for the very legislation that allows Apple to both repatriate its cash, and utilize it for the benefit of it's shareholders.

    Do the American people not take responsibility for electing Congress that created that legislation? 

    If reinvestment with that repatriated cash was important, why was there no legislation in place to force that to happen?

    Seems like Apple has been upgraded to the fourth branch of government, and is expected disburse its funds to directly benefit the people of the U.S.. not the shareholders.
    In what way am I placing the blame for the current economic picture squarely at Apple's doorstep? I don't think I mentioned apple even once after the second paragraph.

    If you read the post one more time I can't imagine you'd still be puzzled at what I was saying about it all, and to be clear it's my opinion. I believe you and Radar may disagree about there being any problems with our current economic actions or having any concerns about societal and wage disparities but perhaps not. 

    I'd appreciate any comments on what I actually written, your opinion does matter to me if no one else. Creating a strawman from it isn't helpful tho and that's what you've done whether you realized it or not. Please read it again. 
    edited December 2018
  • Reply 118 of 152
    gatorguygatorguy Posts: 24,286member
    tmay said:

    gatorguy said:
    tmay said:
    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.


    No doubt you see the writers cause and effect flaw almost immediately, right Tmay?

    He notes how much Apple had spent on buybacks, then says doing so helped bolster the stock price. The evidence he provides? Apple shares up 18% this year, and 150% since 2012. That's far short of being proof of anything directly connected to the share price increase he touts.  Amazon and Alphabet are up more than that over the same 5 years without resorting to a quarter-trillion spent retiring stock, so Apple also doing pretty darn well isn't at all proof that the buyback program has been the reason behind it and therefor a pretty effective use of the cash is it? 
    The flaw is exactly that.  One cannot point to the share repurchases and draw any conclusion regarding how they affected the stock price.  There are just too many other factors.  Would we even begin with the current share price?  Why not the $230+ Apple was at before the ridiculous market reaction to Apple announcing it will no longer report unit sales volumes for iPhone, iPad and Mac?  Could anyone suggest that drop in share price was a result of the share repurchases? I hope not, as it’s clear the drop was based upon other factors, and it’s those factors that muddy the picture.  

    After that drop the whole market fell apart and Apple and everything else dropped a lot more through late November and December.  That swoon was also not the result of Apple’s share repurchases.  Couldn’t have been, as it played out across the entire market.  Taking out those two factors, we’d have to evaluate at Apple’s share price of around $230.  But could we say the share repurchases were solely responsible for driving it to that height?  What about the great success of the more expensive iPhone X sales over the previous year, resulting in some 30% higher iPhone revenue on flat unit sales?  Might that factor have weighed in on the stock movement?  Of course it did.  So how can we isolate the share repurchases?  We simply  cannot.  

    But what we can say is that long-term holders who have not altered their position in the stock today own meaningfully more of the company’s future revenue and profit streams than they did prior to the share repurchases.  And that’s why share repurchases are characterized as providing value to shareholders.  We cannot accurately measure the effects of share repurchases over short-term periods because they are only one factor affecting the stock price.   The share repurchases are likely not even the most significant factor.  Investor sentiment is likely the most significant factor in the short-term, and it therefore takes a very long time indeed to isolate even an estimate of the effect of share repurchases.  

    But there is one effect we can somewhat isolate, because we can see it in action, and that is the effect on dividends.  Apple has held the absolute amount paid out in dividends at about $10-12 billion annually for years.  The company has increased the dividend in lock-step with share repurchase volumes, increasing the dividend by a percentage each year that maintains the absolute amount paid out at that same level.  So the more shares the company retires, the more the dividend is raised that year to maintain the overall payout amount in dollars.  This benefits us shareholders with, as another poster characterized them, gold-standard dividend raises.  

    The rest of the effect of the share repurchases (each remaining share representing a larger share of future earnings), will take care of itself over time.  In short, share repurchases simply aren’t about affecting the share price in the short-term or near-term. They are about enhancing the holdings of the company’s persistent investors.  This is very long-term think, not trader-think.  Only traders, market timers, and novices concern themselves with attempts to suss out the immediate effects of such strategies.  Think Different.

    I hope you understand that sometimes I have to wait in our conversations until your thinking evolves to a point where what I have to say can make sense to you.  There’s little point in me digging down to the essence of the matter prior to that.   
    Gatorguy is stuck on comparing Apple to Alphabet and Amazon; that's certainly flawed...
    You're creating ANOTHER strawman as that's not at all what I'm "stuck on". After you took issue with me pointing out that stock prices didn't appear to be proof of efficacy you then provided a link where the writers claims proof of cause and effect can be seen in the current Apple stock price and the 150% gain over 5 years.  So you suddenly accepted that as valid because someone else said it?  Consistency of thought...

    Please try not to mischaracterize what I've written, and I'm now leaning towards intentionally so in order to try and score some points. It's not a contest. 
    edited December 2018 GeorgeBMac
  • Reply 119 of 152
    tmaytmay Posts: 6,371member
    gatorguy said:
    tmay said:

    gatorguy said:
    @carnegie ;
    I had not seen your previous reply until prompted by this latest one. I'm not certain if it was there before I began typing my reply to Radar, so apologies for asking for it again.

    I generally agree with you that trying to "revise history" in order to compare the outcome of two different actions also would fail at proving which was the better path. Combined with my own reading on the matter I'll accept your opinion as well that there's no clear answer as to what specific effect the stock buybacks have had on the price of Apple's stock today. Could there have been a "better" way to reward investors. You and I seem to agree there might have been but there's no clan way to investigate other paths not taken.

    Regarding questions about the benefits of increasing workers pay, investment in plant and infrastructure, even reducing executive compensation, rather than using essentially "trickle down theory" from the top 1% as the best way to drive our economy forward: I'm in the former camp. IMO the financial instrument driven economy we've embraced has led to even more class-separation and wage disparity.

    BTW, before I continue I completely understand that no one is guaranteed a healthy life, a warm home, hot food or clean water so I absolutely do not endorse a welfare state and the traps that come with it. 

    But I also personally believe when an ever smaller percentage of our citizens control a majority of the economic assets of our country that the choices they make will increasingly favor those around them and in similar circumstances,to the detriment of others who by birth, location, or other factors not of their making are not considered.

    Playing the long game the current hoarding of assets, and the drive for more "profits" for nothing more than profits sake and at any cost will at some point become untenable, It has before, and often, relegating entire societies to no more than case studies in a classroom while almost no one pays attention to the teacher.

    The traditional US economic drivers are being supplanted, the most basic infrastructure is long past its expiration date in large parts of the country, social programs intended to prevent just the type of suffering we saw in this country during the Great Depression are on the verge of failing, and ever larger percentages of our assets are being amassed by an ever smaller percentage of the populace and that small segment holding the pursestrings has chosen to push payment down the road for someone else to deal with. Instead they pillage the fields for whatever assets our country's farmers and factory owners and stores and transportation companies managed to accumulate over the past 250 years and planting an inferior field of paper unable to advance the US economy as a whole (and our political influence along with it) as replacement...

    Corporate profits cannot continue seizing ever larger percentages of our GDP without repercussions. By definition if one segment goes up other segments must suffer in comparison and in the US that has been the wage segment which has fallen significantly over the years. 
     
    "Once you've taken care of yourself and your children, the best use of extra wealth is to give it back to society."
    Bill Gates. 

    He and Warren Buffett are both wise enough to recognise that the support structure that enabled them to prosper far beyond their needs must be replenished for it to continue. They are giving back what they don't need for the betterment of the society that supported them and their dreams.

    IMHO profit for profits sake will eventually kill the dreams for too many people and the tipping point will be reached...

    End of diatribe. 

    I'm puzzled that you appear to blame Apple for the very legislation that allows Apple to both repatriate its cash, and utilize it for the benefit of it's shareholders.

    Do the American people not take responsibility for electing Congress that created that legislation? 

    If reinvestment with that repatriated cash was important, why was there no legislation in place to force that to happen?

    Seems like Apple has been upgraded to the fourth branch of government, and is expected disburse its funds to directly benefit the people of the U.S.. not the shareholders.
    In what way am I placing the blame for the current economic picture squarely at Apple's doorstep? I don't think I mentioned apple even once after the second paragraph.

    If you read the post one more time I can't imagine you'd still be puzzled at what I was saying about it all, and to be clear it's my opinion. I believe you and Radar may disagree about there being any problems with our current economic actions or having any concerns about societal and wage disparities but perhaps not. 

    I'd appreciate any comments on what I actually written, your opinion does matter to me if no one else. Creating a strawman from it isn't helpful tho and that's what you've done whether you realized it or not. Please read it again. 
    You did post this earlier;

    "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."

    Sure seems that you are conflating the plight of the America's worker with Apple's hordes of available cash. While I don't disagree with providing a more progressive economic environment, it isn't up to Apple to provide that.

    As far as I know, Apple pays at least a little bit better than local or regional rates for retail and service 
    personnel, so paying these employees more doesn't necessarily give them a better workforce.

    I'm cool with alternatives to Apple buybacks, but I haven't seen any comments wrt practical ways of doing that.

    A little calculation on pay:

    132,000 employees worldwide, x 2040 hours per year = $270 Million @ each $1 increase in wages.

    Even if you think it appropriate, that's a rounding error in the vast size of the cash.

    Here's another of your earlier comments;

    "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."

    Yeah, getting the same stock increase from buybacks as all the rest of the vested and common shareholders is completely unfair, but given that Apple management has the 5 year product development roadmap in front of them, where the real stock increases lie, is it really relevant?
    edited December 2018
  • Reply 120 of 152
    GeorgeBMacGeorgeBMac Posts: 11,421member
    tmay said:
    tmay said:
    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. 

    Nice straw man.

    Apple's buybacks are in effect, and the direct result of, the Administration's repatriation plan. The lack of those government raises is the result of the Administration, not Apple,

    Again, I would ask how you believe Apple should invest that excess cash.
    No strawman -- but instead, you need to pay attention.   The government gave the money meant to pay America's bills (such as the raises to federal workers) to Apple and others corporations -- who, instead of investing it, gave it away to stock holders.   It was a form of money laundering.   So, federal workers got robbed.   So who will be next?   Medicare recipients?   Republican leaders have already said they need to rob that program to pay for their tax scam.

    https://www.npr.org/2017/12/19/571754894/charts-see-how-much-of-gop-tax-cuts-will-go-to-the-middle-class

    You probably don't remember the tax cut of 2017; most people don't because the effect was so minor. Given that the wealthiest benefited most from the legislation, would you now find a way to blame Apple for the current revenue shortfalls from that legislation? 
    I never did blame Apple.   They, like others, were just the middle man passing the $1.5Trillion from the tax scam through their company to the top 1-2%.  As I said, they just laundered the money.
    gatorguy
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