Apple 'not too big to blow it out' in upcoming quarterly results

24

Comments

  • Reply 21 of 66
    Quote:
    Originally Posted by Dr Millmoss View Post


    The reaction to the next earnings report is going to be very interesting.



    The reaction to the next earnings report is always interesting.
  • Reply 22 of 66
    Quote:
    Originally Posted by vexorg View Post


    Besides what makes AAPL a great stock is it's high beta.



    Huh? Care to explain that one?
  • Reply 23 of 66
    vexorgvexorg Posts: 69member
    Quote:
    Originally Posted by anantksundaram View Post


    Huh? Care to explain that one?



    Beta is a measure of a stock's volatility. By definition the broad market is 1.0. A security that has a beta of 1 will more or less move with the market. A stock with a beta of 1.2 will be 20% more volatile than the market.



    AAPL's current beta is 1.43.



    If you want movement in a stock to make money, then a high beta stock is desirable. If you want stability in the stock price, then you want something that has a low beta.



    MSFT for instance is a great company. (stop sniggering you guys) It makes money hand over fist. But the beta of the stock is .78. The stock price hardly moves.



    Of course with volatility, you have to be much more vigilant on price action. Remember a few weeks ago when Tim Cook was rumored to be leaving Apple, and the stock nose dived for a little bit there.
  • Reply 24 of 66
    samabsamab Posts: 1,953member
    Quote:
    Originally Posted by john galt View Post


    Several years ago my well-intentioned young stock broker called me to say my AAPL holdings made my portfolio very unbalanced. I thanked him for his opinion.



    My portfolio is much more unbalanced today.



    Several years ago, Steve Jobs also exchanged a bunch of Apple warrants because he didn't think that Apple stocks would take off --- which ultimately cost him more than 10 billion dollars. It was labeled as "the dumbest trade ever" by the Wall Street Journal.
  • Reply 25 of 66
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by vexorg View Post


    Beta is a measure of a stock's volatility. By definition the broad market is 1.0. A security that has a beta of 1 will more or less move with the market. A stock with a beta of 1.2 will be 20% more volatile than the market.



    AAPL's current beta is 1.43.



    If you want movement in a stock to make money, then a high beta stock is desirable. If you want stability in the stock price, then you want something that has a low beta.



    MSFT for instance is a great company. (stop sniggering you guys) It makes money hand over fist. But the beta of the stock is .78. The stock price hardly moves.



    Of course with volatility, you have to be much more vigilant on price action. Remember a few weeks ago when Tim Cook was rumored to be leaving Apple, and the stock nose dived for a little bit there.



    Beta is not a measure of stock performance -- it's simply a measure of volatility, and volatility tells you nothing about returns, or even potential returns. A stock can be just a volatile going down as up. It can also be relatively stable going up or down. A high beta is neither good nor bad. It is what it is.
  • Reply 26 of 66
    vexorgvexorg Posts: 69member
    Quote:
    Originally Posted by Dr Millmoss View Post


    Beta is not a measure of stock performance -- it's simply a measure of volatility, and volatility tells you nothing about returns, or even potential returns. A stock can be just a volatile going down as up. It can also be relatively stable going up or down. A high beta is neither good nor bad. It is what it is.



    You are absolutely correct. A volatile stock can go up as quickly as it goes down. For a passive investor who just wants to buy and hold, that can be a scary rollercoaster ride.



    An options trader, particularly one that sells premium thrives on high volatility.



    An example of where this can be particularly effective when there is a period of high volatility (say just before results are released) followed by a volatility crush (where volatility goes down quickly, like after results are released)



    A seller of volatility in such an instance can have the underlying stock move against him and still make money on the trade while a call buyer watches on wondering why the stock went up, like he thought it would yet he is still losing money.
  • Reply 27 of 66
    Quote:
    Originally Posted by vexorg View Post


    Beta is a measure of a stock's volatility. By definition the broad market is 1.0. A security that has a beta of 1 will more or less move with the market. A stock with a beta of 1.2 will be 20% more volatile than the market.



    AAPL's current beta is 1.43.



    If you want movement in a stock to make money, then a high beta stock is desirable. If you want stability in the stock price, then you want something that has a low beta.



    MSFT for instance is a great company. (stop sniggering you guys) It makes money hand over fist. But the beta of the stock is .78. The stock price hardly moves.



    Of course with volatility, you have to be much more vigilant on price action. Remember a few weeks ago when Tim Cook was rumored to be leaving Apple, and the stock nose dived for a little bit there.



    I am truly sorry, but you need to stop spouting nonsense, my friend. Beta is simply a standardized measure of the covariance of a stock's returns to that of the market as a whole. More precisely, it is the covariance in the returns of the stock against the returns on the market portfolio divided by the variance of returns of the mkt portfolio. It does not measure 'volatility' (despite what some 'free' websites will tell you), but rather, a measure of the sensitivity of a stock's returns to the returns of the mkt portfolio.



    It measures the 'systematic' risk left behind in a stock after the 'unsystematic' risk has been presumably diversified away by 'rational' investors. (Btw, the term 'volatility' refers to systematic risk + unsystematic risks).



    For instance, a beta of 1.43 simply means that a 1% increase in the value of the market portfolio is, on average, expected to result in a 1.43% increase in the price of Apple's stock. The only issue is whether a stock produces a return consistent with its beta. Period. (You can, in other words, be a high-beta stock that outperforms, a low beta stock that outperforms, or a high-beta stock that underperforms, or a low-beta stock that underperforms; the concept of a 'desirable beta' is utter nonsense).



    I could go on, but I won't.



    Go look up any basic textbook on finance. Or, please, go enroll in a class on basic finance (many community colleges offer very low-priced courses).
  • Reply 28 of 66
    Quote:
    Originally Posted by vexorg View Post


    You are absolutely correct.



    Unfortunately, on the issue of what the beta means, he is not.



    Add: I've got to run to a meeting, so I'll be unable to respond before later this evening. Sorry about that. The key point I am making is, you don't get to make up your own definitions for well-established, well-known concepts.
  • Reply 29 of 66
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by vexorg View Post


    You are absolutely correct. A volatile stock can go up as quickly as it goes down. For a passive investor who just wants to buy and hold, that can be a scary rollercoaster ride.



    An options trader, particularly one that sells premium thrives on high volatility.



    An example of where this can be particularly effective when there is a period of high volatility (say just before results are released) followed by a volatility crush (where volatility goes down quickly, like after results are released)



    A seller of volatility in such an instance can have the underlying stock move against him and still make money on the trade while a call buyer watches on wondering why the stock went up, like he thought it would yet he is still losing money.



    Now you're really talking about the difference between trading and investing. An investor doesn't care about volatility one way or another, if they believe the company is sound and their prospects for increasing earnings over time is good. Traders OTOH are always trying to guess short-term moves. Suffice to say, I think most people who have the nerve to buy individual stocks should behave as investors, not traders.
  • Reply 30 of 66
    aaarrrggghaaarrrgggh Posts: 1,608member
    Quote:
    Originally Posted by zindako View Post


    I would like to see a stock split, I cant afford $300.00+ per share myself.



    There are always deep-in-the money calls. There are added risks, but your rate of return goes way up as the underlying stock price increases. I made a "dumb" trade today with some November calls at the money, but it is still up nicely for the day.



    At some point I need to reduce my leverage, but it seems like a winning strategy through the end of the year.



    (Disclaimer-- don't get into options until you really understand them and the significant risks they pose, and never put more into them than you can afford to lose!)
  • Reply 31 of 66
    herbapouherbapou Posts: 2,227member
    Quote:
    Originally Posted by digitalclips View Post


    The 'too big to grow much more' concept is really not well thought out. As anti-apple types have loved to point out for years, Apple only has a small penetration into most markets outside of iPods/ music. The fact they are far more profitable in those other sectors than those with the lions share is only more reason to see very healthy growth potential in those very areas. AAPL is ridiculously under valued.



    I appreciate this always brings cries of derision from the math geniuses pointing out there is no numerical gain, but I'd like to see a stock split because it encourages more people to buy as they 'seem' as more affordable.





    AAPL market cap is scary high. I know it still have good potential to growth in the phone and PC market, but hell AAPL is about to beat Exxon has the biggest market cap in the world. I agree they should split to keep the stock prices lower and alllow small investors to own 1 bundle of 100 stocks. I know now you can own smaller amount of stocks but AAPL still trades in 100 stocks bundle on Nasdaq. Not having a full bundle reduce the amount of trade options you can do (like "sell on stop")



    Imo Apple should use part of his cash to buy back stocks and reduce its market cap. And 50 billions is getting pretty high, then dont need that much cash even with all the R&D then need to do.
  • Reply 32 of 66
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by herbapou View Post


    AAPL market cap is scary high. I know it still have good potential to growth in the phone and PC market, but hell AAPL is about to beat Exxon has the biggest market cap in the world. I agree they should split to keep the stock prices lower and alllow small investors to own 1 bundle of 100 stocks. I know now you can own smaller amount of stocks but AAPL still trades in 100 stocks bundle on Nasdaq. Not having a full bundle reduce the amount of trade options you can do (like "sell on stop")



    Imo Apple should use part of his cash to buy back stocks and reduce its market cap. And 50 billions is getting pretty high, then dont need that much cash even with all the R&D then need to do.



    You'll get a lot of argument around here about the value of stock buybacks. They don't provide much value to stockholders.



    I don't know about stop orders and odd lots, but even if it's so, that's such a small thing, it can't have any real impact on the stock price. Besides, GOOG has been trading over $300 for ages, and I don't hear anyone militating for a split. But I agree on the cash. They need to start giving some of it back to the stockholders.
  • Reply 33 of 66
    herbapouherbapou Posts: 2,227member
    Quote:
    Originally Posted by Dr Millmoss View Post


    You'll get a lot of argument around here about the value of stock buybacks. They don't provide much value to stockholders.



    I don't know about stop orders and odd lots, but even if it's so, that's such a small thing, it can't have any real impact on the stock price. Besides, GOOG has been trading over $300 for ages, and I don't hear anyone militating for a split. But I agree on the cash. They need to start giving some of it back to the stockholders.



    Well, buying back stocks dont directly change anything but a reduction of the market cap will make APPL more "normal" and that may rise stock price to match eps. Investors dont like abnormal things, and this what make the stock lag behind earnings



    The problem with odd bundle of stocks is it work with high volume trading like apple, but the weakness shows when volume is low, in that case there is trade lag. Not gonna happen with apple but its unclean
  • Reply 34 of 66
    dr millmossdr millmoss Posts: 5,403member
    Quote:
    Originally Posted by herbapou View Post


    Well, buying back stocks dont directly change anything but a reduction of the market cap will make APPL more "normal" and that may rise stock to match eps. Investors dont like anormal things.



    Buybacks reduce the number of outstanding shares, which theoretically gives all of the existing shareholders a slightly larger piece of the equity pie. There's nothing "abnormal" about Apple's market cap. It's a function of their level of earnings and the market's anticipation of future earnings.
  • Reply 35 of 66
    aaarrrggghaaarrrgggh Posts: 1,608member
    Quote:
    Originally Posted by Dr Millmoss View Post


    Buybacks reduce the number of outstanding shares, which theoretically gives all of the existing shareholders a slightly larger piece of the equity pie. There's nothing "abnormal" about Apple's market cap. It's a function of their level of earnings and the market's anticipation of future earnings.



    I understand your argument for that, but at some point don't you get PE compression as growth is considered unsustainable by large number theory? XOM's balance sheet looks more compelling than AAPL in many ways, but of course there isn't the earnings growth without oil price growth.
  • Reply 36 of 66
    vexorgvexorg Posts: 69member
    Quote:
    Originally Posted by anantksundaram View Post


    I am truly sorry, but you need to stop spouting nonsense, my friend. Beta is simply a standardized measure of the covariance of a stock's returns to that of the market as a whole. More precisely, it is the covariance in the returns of the stock against the returns on the market portfolio divided by the variance of returns of the mkt portfolio. It does not measure 'volatility' (despite what some 'free' websites will tell you), but rather, a measure of the sensitivity of a stock's returns to the returns of the mkt portfolio.



    It measures the 'systematic' risk left behind in a stock after the 'unsystematic' risk has been presumably diversified away by 'rational' investors. (Btw, the term 'volatility' refers to systematic risk + unsystematic risks).



    For instance, a beta of 1.43 simply means that a 1% increase in the value of the market portfolio is, on average, expected to result in a 1.43% increase in the price of Apple's stock. The only issue is whether a stock produces a return consistent with its beta. Period. (You can, in other words, be a high-beta stock that outperforms, a low beta stock that outperforms, or a high-beta stock that underperforms, or a low-beta stock that underperforms; the concept of a 'desirable beta' is utter nonsense).



    I could go on, but I won't.



    Go look up any basic textbook on finance. Or, please, go enroll in a class on basic finance (many community colleges offer very low-priced courses).



    OK I stand corrected. My knowledge of Finance is slim to nil. I was trained as an electrical engineer but worked in systems software for most of my career.



    I probably have even less knowledge of accounting and wouldn't know what to do with balance sheet or a financial statement.



    None of this seems to make a difference to me at this point. I enter and exit trades daily based on technical chart patterns, and have made a comfortable living as a short term trader. I don't generally concern myself with the fundamentals of the companies whose stock I trade, other than to know what they do so as to be able to compare charts with another stock in the same sector.



    If I thought for one minute that my trading could benefit from having knowledge of finance, I would take your advice to enroll in a class in a heartbeat. Do you think such a class be of practical use to me in your estimation?



    My son who is in his final year in college majoring in CS is taking a finance course as an elective and is finding it rather fascinating and he was just talking the other day about how he would like to pursue this area of study a little further.
  • Reply 37 of 66
    Quote:
    Originally Posted by vexorg View Post


    None of this seems to make a difference to me at this point. I enter and exit trades daily based on technical chart patterns, and have made a comfortable living as a short term trader. I don't generally concern myself with the fundamentals of the companies whose stock I trade, other than to know what they do so as to be able to compare charts with another stock in the same sector.



    If I thought for one minute that my trading could benefit from having knowledge of finance, I would take your advice to enroll in a class in a heartbeat. Do you think such a class be of practical use to me in your estimation?



    Given that you have no interest in fundamentals and are a technical trader -- a fundamental mistake, in my view; but each to his own -- I doubt you'll get any benefit from enrolling in a finance course.



    Quote:
    Originally Posted by vexorg View Post


    My son who is in his final year in college majoring in CS is taking a finance course as an elective and is finding it rather fascinating and he was just talking the other day about how he would like to pursue this area of study a little further.



    Congratulations to your son!
  • Reply 38 of 66
    vexorgvexorg Posts: 69member
    Quote:
    Originally Posted by anantksundaram View Post


    Given that you have no interest fundamentals and are a technical trader -- a fundamental mistake, in my view; but each to his own -- I doubt you'll get any benefit from enrolling in a finance course.



    I make mistakes on a daily basis. But I am never so vested in my positions that I will not reverse my position at a moment's notice if necessary.



    Out of curiosity, is your dismissiveness academic or based on experience, and if so, what has been your annualized return for say, the last 3 years?
  • Reply 39 of 66
    Quote:
    Originally Posted by aaarrrgggh View Post


    I understand your argument for that, but at some point don't you get PE compression as growth is considered unsustainable by large number theory? XOM's balance sheet looks more compelling than AAPL in many ways, but of course there isn't the earnings growth without oil price growth.



    You are right. Size brings with it P/E reversion to the mean since you need proportionately larger and larger home runs to maintain returns.



    And yes, a bet on XOM is fundamentally a bet on oil prices.
  • Reply 40 of 66
    Quote:
    Originally Posted by digitalclips View Post


    AAPL is ridiculously under valued.



    There valued as the second highest valued company in the world. But there profits rant the highest in the world not even close. So how much do you think they should be valued at?



    My thoughts on AAPL currently go like this. They don't pay dividends so until you sell you haven't made anything. So you have to question how much higher can the price go? How much more than every other company in the world can they be worth? And if you think the price can go to $350 that means your betting that at some point someone else is going to think it will go to $400 to make them actually pay that price.



    It all comes back to the dividends. For an investment to be worth something you need a return. Once the stock reaches a point where it's unlikely to rise it's effectively giving a 0% return on investment. So now I think if you've got stock sell it, or some of it. Look at the price of google and it's history. If you're going for an increase in value they have a lot of room to move upwards very easily in comparison to apple.
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