Yes, you can create short-term churn by any number of bogus means, but anyone who believes that splits increase shareholder value in any way, is gaga.
While any current holders aren’t making or losing money on a split, it does open up the possibility of buyers getting more shares than they wold otherwise buy at a higher share price. If you have millions of people doing this does it not affect the valuation?
Scenerio 1: Amalgamated Trolling’s stock price is $10,000 per share. Teckstud wants to invest $15,000 into this company because he believes strongly in the services they offer. The maximum he can invest is $10,000.
Scenario 2: Amalgamated Trolling has decided to do a 2:1 split of their stock valued at $10,000 per share. Each share now costs $5,000. Teckstud is now able to invest his full $15,000 for a total of 3 shares.
You don't seem to be able to parse my words correctly, so let me elaborate:
No one splits a stock to cause churn (where did you infer this - not from me). You have neglected decades of known research that clearly shows a direct correlation - OVER TIME, not immediately, in shareholder value increases and stock splits (this makes sense, because only companies that have faith in their future earnings potential tend to be the ones that split shares, with the notable exception of recent years following the dot.com bust. I've been investing and trading for 52 years - yes 52 years, have traded in mutual funds since 1971, and actively traded on the internet since the mid to late 90's, and many spendid research houses (such as the "Right Line Split Report", "Market Logic", and others have seen this tendency. Don't wish to continue the debate, but it is real, quantifiable, and tangible.
As for PE ratios, much debate exists as to its proper use, and PE as it is usually connoted is the HISTORICAL PE (price/past earnings), not so called forward PE ratios. As a former accountant, I am well aware you can play around with the numbers on earnings from GAAP numbers to present value numbers, etc, etc, and remove anything you like if you rationalize it being non-recurring. Anyhow, the PE is only useful (in my opinion, and in the opinion of most investors) if you compare Apples to Appes (sorry bout that), ie compare within like companies in like markets - difficult to do. As you intimated, you may "award" a company with a higher PE if you think their future earnings will be better than a competitor.
In a listless market (as this is), and in an almost disinflationary market, PE's tend to go down, so my take on Apple's low PE makes me comfortable that they will have no problem sustaining the growth, compared to historical PE's for like companies.
Ferchrissakes, the PE of Apple is little more than more staid companies, and would be much higher, if this market was on fire. I just believe that keeping Apple's stock price rising, without splits, is OK now, and, as you mentioned, not of much concern to the average Joe Investor (assuming he is logical - lots of folks don't know or care about PE, and will set an artificial price point, above which they have no intention of buying - even a share (my sister is this way, and no amount of education can make her consider a stock with such a "high" stock price, even though she intellectually knows full well about PE ratios.
If still think Steve Jobs would love to have a stock price higher than Google's (with comparable PE's, of course). If you don't think he got a kick out of the whole Microsoft market valuation thingie vs Apple then you have a much different opinion of him than I.
I got your intimation from your own words, which I hope I won't have to quote back (or parse) since they referred to an immediate post-split bounce. I would call this churn, since the bounce is an artificial one of course, given that shareholder value hasn't changed one iota, and will not in the future as a result of the split. (With the possible exception of a stock which pays a dividend, if the dividend is increased at the same time. Not that this applies in AAPL's case.)
I don't know what research you believe points to splits creating shareholder value. I wish you'd direct me to any research actually supporting this argument, as I have never seen it myself. As an old-time investor (of which I am one myself) I think perhaps you are referring to the days of odd-lot trading, when buying and selling in lots under 100 shares was an expensive proposition. Those days are long past. Today an investor can buy seven shares in a company, if that's what they want to do, with no broker penalty -- and their odd lot is no more difficult to sell than a block of 1,000.
Naturally I agree with you about P/E in general. Most people do fail to understand what it means. However your implication again as I took it was that a company with a lower P/E is a safer bet. If you think that is true, and you are interested in "like companies" then you must sink your money into MSFT instead of AAPL. We really must consider why AAPL is selling for a much higher multiple, and why it's justified. There's a reason, as I'm sure you well know.
Further, when we watch the P/E of a company decline, it can point to more than one thing. The first is that it's a reflection of a weak market overall, and not necessarily a bad thing if the decline more or less paces the decline in P/E for the market as a whole. The second possibility is lowered investor expectations for earnings growth. Now this is an entirely different matter, and most certainly not a good thing to witness as an investor. Keep that up for awhile and you've got a boat anchor in your portfolio. Say, like MSFT for the past ten years or so now. Joe Average investor may not grasp any of this, but in reality, Joe Average does not move the markets. The institutions do, and the people who invest for mutual funds and pension funds understand it full well.
I can't agree that Steve Jobs and his board are into arbitrary numerical comparisons. If by any chance they wanted to play the silly "mine is bigger than yours" game, the only one that even remotely counts is market cap.
While any current holders aren’t making or losing money on a split, it does open up the possibility of buyers getting more shares than they wold otherwise buy at a higher share price. If you have millions of people doing this does it not affect the valuation?
Scenerio 1: Amalgamated Trolling’s stock price is $10,000 per share. Teckstud wants to invest $15,000 into this company because he believes strongly in the services they offer. The maximum he can invest is $10,000.
Scenario 2: Amalgamated Trolling has decided to do a 2:1 split of their stock valued at $10,000 per share. Each share now costs $5,000. Teckstud is now able to invest his full $15,000 for a total of 3 shares.
On very high value shares, yes it has some effect -- which is why BRK-B was eventually split (at around $4,000). However I don't see that AAPL even at $375 is a prohibitive price for an average investor. You might be arguing that some "rounding down" occurs at any price, which is true I suppose, but the impact it seems has to be very marginal, except at very high share prices.
While I would love for this to happen I am also not big on trying to predict the stock market even more so with a major midterm election about to happen where the power in congress could change hands.
and what does a change in power in congress have to do with how well Apple stock does? NOTHING. People are going to buy Apple products no matter WHO is in power...
Do you have any eveidence of business adoption of the iPad? Links with real data? We have exactly one executive that brought his iPad into work.
It struggled to get on our WPA2 wireless network. Watching him type in the key was pretty dam funny since it must be 25+ characters long. We had to shut off our Cisco Clean Access box for his floor just so it would work (nice security) and even then it kept dropping off the network.
That lasted a whole half a day and we have not seen it again.
Has he tried after the update? Pretty clean for us.
What effect on APPL will the potentially massive number of people returning the phone because of the proximity sensor have?
My boss just returned his (at the suggestion of Apple Care) for a new one. He was told that it was a batch of phones. He didn't say how "massive" that batch was.
My boss just returned his (at the suggestion of Apple Care) for a new one. He was told that it was a batch of phones. He didn't say how "massive" that batch was.
The iPhone 4 has one sensor. Previous models had two or three. It's a hardware issue affecting every phone--however, it manifests itself differently depending on the user's habits. This is the common misconception I've noticed on Apple's Support Forum...people post that they don't have the problem and therefore it can not be universal. What I think might be the case is that it is universally present but merely affects users to different degrees. Nevertheless, there have been two threads at Apple nearly 100 pages long. It seems very, very widespread. I and many people I know are waiting for this to be fixed. I may get one in mid-Sept. since they gave that Sept 30th date for the end of the cases and so perhaps they'll come out with a new iPhone 4.1 with a hardware fix in October. In which case I'd return mine and expect an exchange. That'll cost AAPL.
What effect on APPL will the potentially massive number of people returning the phone because of the proximity sensor have?
Smart ass answer: Nothing, because Apple's stock ticker is AAPL.
Non-smart ass answer: L = pn where L equals net loss, p equals net profit and n equals number of units returned without being replaced. To account for the onea replaced we have to subtract the net profit from the second device from the net profit that can gain from refurbishing the first device and then divide by two to get the average net profit between the two devices.
I think that's right but it's been a long time since I ran these sort of numbers.
Quote:
Originally Posted by JupiterOne
My boss just returned his (at the suggestion of Apple Care) for a new one. He was told that it was a batch of phones. He didn't say how "massive" that batch was.
The proximity issue was most annoying. I dropped and muted more calls that way than my entire tenure with AT&T from an issue with their side, which includes driving into No Service areas. However, it has not happened side updating to v4.1b3. It did happen with previous 4.1 betas.
Comments
Yes, you can create short-term churn by any number of bogus means, but anyone who believes that splits increase shareholder value in any way, is gaga.
While any current holders aren’t making or losing money on a split, it does open up the possibility of buyers getting more shares than they wold otherwise buy at a higher share price. If you have millions of people doing this does it not affect the valuation?
You don't seem to be able to parse my words correctly, so let me elaborate:
No one splits a stock to cause churn (where did you infer this - not from me). You have neglected decades of known research that clearly shows a direct correlation - OVER TIME, not immediately, in shareholder value increases and stock splits (this makes sense, because only companies that have faith in their future earnings potential tend to be the ones that split shares, with the notable exception of recent years following the dot.com bust. I've been investing and trading for 52 years - yes 52 years, have traded in mutual funds since 1971, and actively traded on the internet since the mid to late 90's, and many spendid research houses (such as the "Right Line Split Report", "Market Logic", and others have seen this tendency. Don't wish to continue the debate, but it is real, quantifiable, and tangible.
As for PE ratios, much debate exists as to its proper use, and PE as it is usually connoted is the HISTORICAL PE (price/past earnings), not so called forward PE ratios. As a former accountant, I am well aware you can play around with the numbers on earnings from GAAP numbers to present value numbers, etc, etc, and remove anything you like if you rationalize it being non-recurring. Anyhow, the PE is only useful (in my opinion, and in the opinion of most investors) if you compare Apples to Appes (sorry bout that), ie compare within like companies in like markets - difficult to do. As you intimated, you may "award" a company with a higher PE if you think their future earnings will be better than a competitor.
In a listless market (as this is), and in an almost disinflationary market, PE's tend to go down, so my take on Apple's low PE makes me comfortable that they will have no problem sustaining the growth, compared to historical PE's for like companies.
Ferchrissakes, the PE of Apple is little more than more staid companies, and would be much higher, if this market was on fire. I just believe that keeping Apple's stock price rising, without splits, is OK now, and, as you mentioned, not of much concern to the average Joe Investor (assuming he is logical - lots of folks don't know or care about PE, and will set an artificial price point, above which they have no intention of buying - even a share (my sister is this way, and no amount of education can make her consider a stock with such a "high" stock price, even though she intellectually knows full well about PE ratios.
If still think Steve Jobs would love to have a stock price higher than Google's (with comparable PE's, of course). If you don't think he got a kick out of the whole Microsoft market valuation thingie vs Apple then you have a much different opinion of him than I.
I got your intimation from your own words, which I hope I won't have to quote back (or parse) since they referred to an immediate post-split bounce. I would call this churn, since the bounce is an artificial one of course, given that shareholder value hasn't changed one iota, and will not in the future as a result of the split. (With the possible exception of a stock which pays a dividend, if the dividend is increased at the same time. Not that this applies in AAPL's case.)
I don't know what research you believe points to splits creating shareholder value. I wish you'd direct me to any research actually supporting this argument, as I have never seen it myself. As an old-time investor (of which I am one myself) I think perhaps you are referring to the days of odd-lot trading, when buying and selling in lots under 100 shares was an expensive proposition. Those days are long past. Today an investor can buy seven shares in a company, if that's what they want to do, with no broker penalty -- and their odd lot is no more difficult to sell than a block of 1,000.
Naturally I agree with you about P/E in general. Most people do fail to understand what it means. However your implication again as I took it was that a company with a lower P/E is a safer bet. If you think that is true, and you are interested in "like companies" then you must sink your money into MSFT instead of AAPL. We really must consider why AAPL is selling for a much higher multiple, and why it's justified. There's a reason, as I'm sure you well know.
Further, when we watch the P/E of a company decline, it can point to more than one thing. The first is that it's a reflection of a weak market overall, and not necessarily a bad thing if the decline more or less paces the decline in P/E for the market as a whole. The second possibility is lowered investor expectations for earnings growth. Now this is an entirely different matter, and most certainly not a good thing to witness as an investor. Keep that up for awhile and you've got a boat anchor in your portfolio. Say, like MSFT for the past ten years or so now. Joe Average investor may not grasp any of this, but in reality, Joe Average does not move the markets. The institutions do, and the people who invest for mutual funds and pension funds understand it full well.
I can't agree that Steve Jobs and his board are into arbitrary numerical comparisons. If by any chance they wanted to play the silly "mine is bigger than yours" game, the only one that even remotely counts is market cap.
While any current holders aren’t making or losing money on a split, it does open up the possibility of buyers getting more shares than they wold otherwise buy at a higher share price. If you have millions of people doing this does it not affect the valuation?
On very high value shares, yes it has some effect -- which is why BRK-B was eventually split (at around $4,000). However I don't see that AAPL even at $375 is a prohibitive price for an average investor. You might be arguing that some "rounding down" occurs at any price, which is true I suppose, but the impact it seems has to be very marginal, except at very high share prices.
While I would love for this to happen I am also not big on trying to predict the stock market even more so with a major midterm election about to happen where the power in congress could change hands.
and what does a change in power in congress have to do with how well Apple stock does? NOTHING. People are going to buy Apple products no matter WHO is in power...
Do you have any eveidence of business adoption of the iPad? Links with real data? We have exactly one executive that brought his iPad into work.
It struggled to get on our WPA2 wireless network. Watching him type in the key was pretty dam funny since it must be 25+ characters long. We had to shut off our Cisco Clean Access box for his floor just so it would work (nice security) and even then it kept dropping off the network.
That lasted a whole half a day and we have not seen it again.
Has he tried after the update? Pretty clean for us.
What effect on APPL will the potentially massive number of people returning the phone because of the proximity sensor have?
My boss just returned his (at the suggestion of Apple Care) for a new one. He was told that it was a batch of phones. He didn't say how "massive" that batch was.
My boss just returned his (at the suggestion of Apple Care) for a new one. He was told that it was a batch of phones. He didn't say how "massive" that batch was.
The iPhone 4 has one sensor. Previous models had two or three. It's a hardware issue affecting every phone--however, it manifests itself differently depending on the user's habits. This is the common misconception I've noticed on Apple's Support Forum...people post that they don't have the problem and therefore it can not be universal. What I think might be the case is that it is universally present but merely affects users to different degrees. Nevertheless, there have been two threads at Apple nearly 100 pages long. It seems very, very widespread. I and many people I know are waiting for this to be fixed. I may get one in mid-Sept. since they gave that Sept 30th date for the end of the cases and so perhaps they'll come out with a new iPhone 4.1 with a hardware fix in October. In which case I'd return mine and expect an exchange. That'll cost AAPL.
What effect on APPL will the potentially massive number of people returning the phone because of the proximity sensor have?
Smart ass answer: Nothing, because Apple's stock ticker is AAPL.
Non-smart ass answer: L = pn where L equals net loss, p equals net profit and n equals number of units returned without being replaced. To account for the onea replaced we have to subtract the net profit from the second device from the net profit that can gain from refurbishing the first device and then divide by two to get the average net profit between the two devices.
I think that's right but it's been a long time since I ran these sort of numbers.
My boss just returned his (at the suggestion of Apple Care) for a new one. He was told that it was a batch of phones. He didn't say how "massive" that batch was.
The proximity issue was most annoying. I dropped and muted more calls that way than my entire tenure with AT&T from an issue with their side, which includes driving into No Service areas. However, it has not happened side updating to v4.1b3. It did happen with previous 4.1 betas.