Hedge fund manager David Einhorn staying in Apple, sees 'tremendous value'

Posted:
in AAPL Investors
Infamous hedge fund manager David Einhorn, who has previously butted heads with Apple, remains bullish on the iPhone maker despite its recent market plunge, giving the company a vote of confidence during a recent conference call.




"We continue to own Apple, which is traded down to a single-digit PE of a bear case earnings," said Einhorn, who runs the hedge fund Greenlight Capital. "We believe there is tremendous value in Apple's brand and growing global customer base that periodically buys new devices and increasingly buys additional services."

Einhorn's comments come amid a steep decline for Apple shares in the wake of what many view as a disappointing fiscal quarter. The company has shed tens of billions of dollars in market capitalization since revealing its second-quarter earnings, which were off nearly $8 billion year-over-year.

Despite his support of the company this week, Einhorn himself did cut his share in AAPL stock in the fourth quarter of 2015.

Still, Einhorn's position does not mirror that of activist investor Carl Icahn, who got out of the stock completely in recent weeks. Icahn, previously one of Apple's primary Wall Street cheerleaders, cited concerns about Apple's future in the tightening Chinese market.

Einhorn has had a difficult relationship with Apple, having publicly contested the company's growing cash hoard, claiming the practice hurt investors. He sued the company over the issue in 2013, but dropped the action less than a month later.

Comments

  • Reply 1 of 11
    blastdoorblastdoor Posts: 1,918member
    Very hard to know what guys like this really think -- they don't share opinions like this because they are trying to help others. 

    But I tend to agree Apple is severely undervalued. I also understand why people might think it's fairly valued. It's a very unusual company. 

    I think that in order to own AAPL stock, you have to:

    (1) be in it for the long haul
    (2) believe that this company is capable of repeatedly creating products (not just new classes of products, but also new iterations on existing products) that are sufficiently better than the competition to warrant higher profit margins
    (3) believe that the company is capable of growing sales of those products

    I meet all of these criteria, and so I continue to own the stock. 

    The reasons that I believe #2 and #3 are:

    (a) I think that Apple's employees and structure are uniquely well suited to repeatedly developing "best-in-class" products and, occasionally, new product categories. I acknowledge that this is actually a radical belief and I understand why it is not widely shared among investors. 
    (b) Apple's *vast* financial resources mean that it can survive critical mistakes and that it can make very substantial investments in both capital and R&D to give its products uniquely valuable features. (this is not a radical belief -- the financial resources are obviously there). 
    (c) I think Apple has built a very powerful brand that means customers will be highly receptive to new products -- Apple does not need to worry about people failing to notice a great product. If Apple makes a great product, it will sell very well. 




    applejakestailpiperadarthekatration al
  • Reply 2 of 11
    buckalecbuckalec Posts: 192member
    Hedge funds are inherently evil. Jony & Tim, a snergie from heaven. 

  • Reply 3 of 11
    irelandireland Posts: 17,585member
    Wall St. may just be the root of all evil. Would love if Apple were private.
  • Reply 4 of 11
    lkrupplkrupp Posts: 7,072member
    ireland said:
    Wall St. may just be the root of all evil. Would love if Apple were private.
    So would I but that’s not going to happen. How would any private equity cabal come up with over half a trillion dollars to take it private? The stock would have to lose much of its value for that to happen. You know, like Dell. Wall Street may be the root of all evil but it’s the only way you can keep up with inflation these days. A MMF or CD will earn you less than 1%. Burying it in the back yard isn’t even safe, let alone profitable. Real Estate? Meh. Gold? No. Owning a piece of Apple? In the long run, yes.
    edited May 2016 palomine
  • Reply 5 of 11
    holysmokesholysmokes Posts: 23member
    "Einhorn's comments come amid a steep decline for Apple shares in the wake of what many view as a disappointing fiscal quarter. The company has shed tens of billions of dollars in market capitalization since revealing its second-quarter earnings, which were off nearly $8 billion year-over-year."

    Earnings (profits) were not down 8 billion year over year. They are however down ~8 billion from last quarter which was the highest in all of worldwide corporate history.
    radarthekatliketheskyration alpalomine
  • Reply 6 of 11
    ac1234ac1234 Posts: 138member
    ireland said:
    Wall St. may just be the root of all evil. Would love if Apple were private.
    What is evil about an open market for selling and buying corporate stocks?
  • Reply 7 of 11
    Einhorn. Finkle. Finkle and Einhorn. Einhorn and Finkle. Finkle is Einhorn?
    patchythepirateration al
  • Reply 8 of 11
    Everyone always tries to find a logical reason for Apple's significant under-valuation. The latest is that Apple has failed to "control the narrative." Apple makes a shitload of money and has a great ecosystem. That's the narrative. Everyone knows it. Apple doesn't need to shout it out.

    The only thing that actually makes sense is that Apple is out of favor with the people/hedge funds (maybe due to not giving them kickbacks like I assume AMZN/GOOG/MSFT are?) that control the stock market through media manipulation and algorithmic rapid trading.

    Maybe the fact that Einhorn, or Finkle,* or whomever this guy is, is promoting AAPL is a sign that Apple is about to actually start dealing more directly with wall street.

    *Perfect comment mcfrazieriv!
  • Reply 9 of 11
    bugsnwbugsnw Posts: 716member
    Wall Street can't push Apple around. Well, maybe a little bit, since Tim is in charge, as evident with Carl Icahn and share buybacks. So there isn't the forgiveness like with AMZN, which enjoys a PE 30 x higher than Apple's.

    Apple's 10 PE is ridiculous and the way they get battered for what are actually amazing quarters.

    I'm still long, however, because I think Tim has something cooking in the back room. Apple needs this, whatever it is, to shut up the naysayers who say Apple's not an innovative company since SJ died.

    Also, I'm praying that iPhone 7 will LOOK completely different. It needs to scream NEW!!!! in every way. AMOLED, water-resistant, no 3.5 mm jack, etc.

    Time to change up the Mac line as well. Chinless iMacs, Thin, Wedge-shaped laptops across the line. 

    I think it's very doable for Apple. SURPRISE us. It can be anything. The stock will recover and maybe Wall Street will nudge it up to a 15 or 20 PE.
  • Reply 10 of 11
    bestkeptsecretbestkeptsecret Posts: 3,282member
    Einhorn. Finkle. Finkle and Einhorn. Einhorn and Finkle. Finkle is Einhorn?

    Einhorn's a MAN!!
  • Reply 11 of 11
    ksecksec Posts: 1,559member
    Isn't he an activist investor?
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