I've been out of pocket for several days and am getting over an injury, so this will be the first post in a bit and will be brief. I do hope that anyone interested in my thoughts is following me on Seeking Alpha. A number of articles there are very good quality, and the comment section doesn't allow trolls through as Blogger's usual format does, and as was the case with The Daily Capitalist, the comments on my articles are often learning experiences for me.
In any case, as we begin to move away from the crisis events of 2008 and their aftermath, a lot is similar to the ending of The Great Gatsby. In it, Fitzgerald describes himself (Nick Carraway) always being dragged back into the past. We, he suggests, are boats trying to go upstream against the current (i.e., into the future), but we are "borne back ceaselessly into the past". To wit: one financial crisis is similar to another:
My long-standing analogy, which I discussed during the semi-crisis summer of 2011 and then several times last year, is that the European mess is similar in many ways to the US mess of 2006-9 in that the insolvencies never seemed to end. Some people forget numerous small mortgage brokers going under in 2006 pursuant to the housing bubble bursting around the end of 2005. And people forget the rumblings of trouble in finance-land when the auction rate securities mess began in the fall of 2007. So the US crisis went on a good while, as is the eurozone mess. After the Cyprus banking fiasco (which continues), stress in financial markets continues to intensify as the depression in so many European countries contines.
Dr. Copper is breaking support, Treasuries and gold are well-bid, but Treasuries are better-bid than gold. These are signs of a deflationary bust..
US stock and bond markets are, meanwhile, following the script they followed during the Asian contagion, meaning they are being supported by chaos elsewhere in the globe. There's nothing like being able to buy your own bonds and have all the economic and other advantages that the US has. Thus I continue with a Fortress America investing outlook, as I introduced in the late summer or early fall in 2011.
This extends to Apple's problems in China and Europe. It includes all multinationals. Caterpillar has had problems in China, as well.
Eventually, the Asian contagion came to America. Why should this time be different? (Though we can hope.)
A possible template for US stock markets is as follows:
I can reasonably see the Russell 2000 (IWM is the major ETF) acting like the NAZ of 1998-2000 and having a blowoff top (it's toppy enough already on valuation) and peaking anywhere from last Friday (it was down today) to two years from now. But let's say it's so overvalued already (it is) that it peaks this year. In that case, I would expect the S&P 500 and the Dow 30 to peak or nearly peak some months later. This was the pattern in Y2K as the NAZ peaked in March, crashed, half-recovered, and the SPY made a double top half a year after the NAZ topped.
This environment would continue to be, as they say on the Street, "constructive" for Treasuries. I'm positioned heavily with bonds right now. It's been an amazing bond rally since Y2K and again since 2007. Can bonds three-peat?
My best answer for now is that speculators on the 30-year T-bond in the futures pits now show their longest/largest sustained net negative positioning since the first half of 2011: the best time to own zero-coupon Treasuries since the fall of 2008.
I'm watching Mr. Bond and Dr. Copper closely.
Showing posts with label Apple. Show all posts
Showing posts with label Apple. Show all posts
Monday, April 1, 2013
Sunday, July 22, 2012
Newton's Fruit Still Falling Upwards, and Other Observations
With markets at a strange "new normal" of zero-ish interest rates for heavily indebted but "safe" sovereigns, and where an historically normal long-term interest rate of 6-7% for Italian debt is, we are told, unsustainable, a relative sanity prevails in a few sectors of other markets. To wit, large-cap technology stocks are, despite operating in growth fields, relatively cheap. Amongst them, none is as large or as cheap as Newton's fruit, aka AAPL. As much of the investing public knows, Apple discloses how last quarter went for it on Tuesday afternoon. It will offer a hint of the current quarter.
Apple is growing at an enormous rate. Last quarter, its operating margin soared to 47%. It has made no $6 B acquisition as MSFT just has written off. There will be no writeoffs. More importantly to me, there will be no non-GAAP earnings presentation. There will be no acquisition of "cheap" debt.
For those occasional investors who do not follow all things Apple as I do, the company has been on an unrecognized roll in key but under-reported areas. It has been securing potentially important legal victories over Samsung in the court battle in California heard by the Korean-descended Judge Lucy Koh. Florina Mueller, an expert blogger on these matters, said this past week:
Mr. Mueller is a cautious blogger. It means something when he words this so strongly.
Competitively, Microsoft appears confused with its transition to Windows 8. Unlike Apple, which is adjusting its Mac OS toward that of iOS but keeping it different, MSFT is going all in on the tablet-phone OS for Windows. This is tres strange, given that MSFT has almost no market share in mobile devices. Worse, MSFT's partner in telephony, NOK, had its debt rating lowered into deeper junk territory last week. Also horrible for the Microsoft ecosystem is its "Surface" tablet product. Mr. Softee is now entering into direct hardware competition with the hardware licensees that have been so
I suspect that as Retina Display-enabled Macs roll out and few Windows customers "upgrade" to Win 8, the Mac's market share in "PCs" will increase. At some point, there could be a tipping point in which the Mac platform regains the lead over Windows in desktop and larger-than-iPad mobile computers.
Last but not least, the iPad is the product of the decade. (The iPhone was the product of the prior decade.) The iPad is estimated to have 90% share of its category, namely 10 inch tablets. It is up to Apple whether it wants to make Google's new small tablet, Amazon's Kindle line, etc. wildly unprofitable by launching a mini-iPad. Small matter. The iPad is Apple's main entry into the business market. The iPhone is a worthy partner. Tim Cook, as an ex-IBMer and an MBA, is much more oriented to succeeding in the business world than was Steve Jobs.
A few months ago, Apple's head product designer, Jonathan Ive, disclosed that the current project he is working on feels like Apple's most important project yet. One doubts this is simply the next iPhone iteration. Assuming it is the long-awaited full-size television, and that it launches next year, Apple will have in 2013 a rapidly-growing iPad product or product line, an important and still-growing iPhone product, a potential third blockbuster television product, and a Mac line that continues to gain market share and could surprise to the upside. Plus, iTunes is a large business that sooner rather than later would be a Fortune 500 company all on its own; and iPods remain a cash cow that both require no advertising expense and are so small that they take up little display room in Apple stores.
Apple is the financially strongest corporation in the world. It has the fastest growth of any large company. Its retail presence is so strong that if it wished, it could increase its marketing of other companies' products, thus filling any temporary gaps in its own product lines. It is becoming more like an integrated oil company in that it is expanding its manufacturing operations backwards along with the growing direct retail presence. Its dividend yield exceeds that of the 10-year T-note. Value Line anticipates that it will have at least $200 B book value, with no intangibles or goodwill on the books, by the end of CY 2013. It could easily earn $50/share this calendar year and could easily earn $100/share by CY 2015. Why is its P/E below market when it has the best financial statement and the fastest growth of any large company in the world?
I think the answer is that the business and analytic community has never seen any very large company grow so fast organically. There is fear that somewhere, somehow, Apple will go the way of RIMM and NOK; so, the analysts "won't get fooled again". LOL.
Regardless of how trading goes before and after earnings, AAPL is IMHO the best growth stock around. It is growing at an unbelievable rate. It sells at roughly 10X expected CY 2012 earnings net of expected cash and marketable securities on hand by end-2012, even after "haircutting" the value of offshore assets. Yet its two major product lines are early in their life cycles, and a major new product line may well be introduced next year.
So far as I can see, most stocks are overpriced given the serious economic and financial dislocations that exist today globally and in the U.S. and other leading economic powers. AAPL is an exception, though it is not a "Graham and Dodd" value stock. (LOL again)
The only other stocks I find worth owning include the occasional DE-type of reasonably-priced cyclical stock and a few other high-quality equities, but I think they get cheaper before they get more expensive. Then, for now, there is the derivative bond play, as it were, in the Con Ed-type stock. Steady ED is simply too cheap if one believes that its dividend is secure. You can own a 30-year T-bond at about 2.5% per year or ED at about a 50% higher yield with some inflation protection and- believe it or not- takeover possibilities. With the 10-year yield at (say) 1.5%, ED should be about double its current share price to re-establish its historical relationship to that benchmark bond. Thus ED is already discounting a major rise in interest rates.
Spain is now widely recognized as bust. I suspect that once Italy is so recognized, that will be the end of the bad news and it will be time to buy inflation hedges again. John Mauldin is promoting France as next up. I don't think that's in the cards, at least not this economic cycle, though of course we shall see what we shall see. Thus my game plan for now strategizes 2012's coming hurricane season months as reprising some combination of 2008 (Europe's sovereigns taking the place of US financials this time around) and 2011, as economies lurch down again as they did last year in the pre-recessionary phase.
Meanwhile, the valuation and growth trends favor AAPL gaining a higher relative P/E to the market while earnings grow rapidly. AAPL and ED, a strange combo to make up my investment faves.
Apple is growing at an enormous rate. Last quarter, its operating margin soared to 47%. It has made no $6 B acquisition as MSFT just has written off. There will be no writeoffs. More importantly to me, there will be no non-GAAP earnings presentation. There will be no acquisition of "cheap" debt.
For those occasional investors who do not follow all things Apple as I do, the company has been on an unrecognized roll in key but under-reported areas. It has been securing potentially important legal victories over Samsung in the court battle in California heard by the Korean-descended Judge Lucy Koh. Florina Mueller, an expert blogger on these matters, said this past week:
I've said it before that whatever happens at the upcoming trial, Samsung won't be forced out of the market, but a very significant breakthrough for Apple's intellectual property enforcement is increasingly likely.
Mr. Mueller is a cautious blogger. It means something when he words this so strongly.
Competitively, Microsoft appears confused with its transition to Windows 8. Unlike Apple, which is adjusting its Mac OS toward that of iOS but keeping it different, MSFT is going all in on the tablet-phone OS for Windows. This is tres strange, given that MSFT has almost no market share in mobile devices. Worse, MSFT's partner in telephony, NOK, had its debt rating lowered into deeper junk territory last week. Also horrible for the Microsoft ecosystem is its "Surface" tablet product. Mr. Softee is now entering into direct hardware competition with the hardware licensees that have been so
I suspect that as Retina Display-enabled Macs roll out and few Windows customers "upgrade" to Win 8, the Mac's market share in "PCs" will increase. At some point, there could be a tipping point in which the Mac platform regains the lead over Windows in desktop and larger-than-iPad mobile computers.
Last but not least, the iPad is the product of the decade. (The iPhone was the product of the prior decade.) The iPad is estimated to have 90% share of its category, namely 10 inch tablets. It is up to Apple whether it wants to make Google's new small tablet, Amazon's Kindle line, etc. wildly unprofitable by launching a mini-iPad. Small matter. The iPad is Apple's main entry into the business market. The iPhone is a worthy partner. Tim Cook, as an ex-IBMer and an MBA, is much more oriented to succeeding in the business world than was Steve Jobs.
A few months ago, Apple's head product designer, Jonathan Ive, disclosed that the current project he is working on feels like Apple's most important project yet. One doubts this is simply the next iPhone iteration. Assuming it is the long-awaited full-size television, and that it launches next year, Apple will have in 2013 a rapidly-growing iPad product or product line, an important and still-growing iPhone product, a potential third blockbuster television product, and a Mac line that continues to gain market share and could surprise to the upside. Plus, iTunes is a large business that sooner rather than later would be a Fortune 500 company all on its own; and iPods remain a cash cow that both require no advertising expense and are so small that they take up little display room in Apple stores.
Apple is the financially strongest corporation in the world. It has the fastest growth of any large company. Its retail presence is so strong that if it wished, it could increase its marketing of other companies' products, thus filling any temporary gaps in its own product lines. It is becoming more like an integrated oil company in that it is expanding its manufacturing operations backwards along with the growing direct retail presence. Its dividend yield exceeds that of the 10-year T-note. Value Line anticipates that it will have at least $200 B book value, with no intangibles or goodwill on the books, by the end of CY 2013. It could easily earn $50/share this calendar year and could easily earn $100/share by CY 2015. Why is its P/E below market when it has the best financial statement and the fastest growth of any large company in the world?
I think the answer is that the business and analytic community has never seen any very large company grow so fast organically. There is fear that somewhere, somehow, Apple will go the way of RIMM and NOK; so, the analysts "won't get fooled again". LOL.
Regardless of how trading goes before and after earnings, AAPL is IMHO the best growth stock around. It is growing at an unbelievable rate. It sells at roughly 10X expected CY 2012 earnings net of expected cash and marketable securities on hand by end-2012, even after "haircutting" the value of offshore assets. Yet its two major product lines are early in their life cycles, and a major new product line may well be introduced next year.
So far as I can see, most stocks are overpriced given the serious economic and financial dislocations that exist today globally and in the U.S. and other leading economic powers. AAPL is an exception, though it is not a "Graham and Dodd" value stock. (LOL again)
The only other stocks I find worth owning include the occasional DE-type of reasonably-priced cyclical stock and a few other high-quality equities, but I think they get cheaper before they get more expensive. Then, for now, there is the derivative bond play, as it were, in the Con Ed-type stock. Steady ED is simply too cheap if one believes that its dividend is secure. You can own a 30-year T-bond at about 2.5% per year or ED at about a 50% higher yield with some inflation protection and- believe it or not- takeover possibilities. With the 10-year yield at (say) 1.5%, ED should be about double its current share price to re-establish its historical relationship to that benchmark bond. Thus ED is already discounting a major rise in interest rates.
Spain is now widely recognized as bust. I suspect that once Italy is so recognized, that will be the end of the bad news and it will be time to buy inflation hedges again. John Mauldin is promoting France as next up. I don't think that's in the cards, at least not this economic cycle, though of course we shall see what we shall see. Thus my game plan for now strategizes 2012's coming hurricane season months as reprising some combination of 2008 (Europe's sovereigns taking the place of US financials this time around) and 2011, as economies lurch down again as they did last year in the pre-recessionary phase.
Meanwhile, the valuation and growth trends favor AAPL gaining a higher relative P/E to the market while earnings grow rapidly. AAPL and ED, a strange combo to make up my investment faves.
Tuesday, June 19, 2012
Deere Apple: GARP's Time Is (Approximately) Here and Now
Just wanted to put in a quick stock comment. Since I think that "safe" govvies are "played", I have gone to stocks with fortress balance sheets and unique large niches in core areas of the global economy. Thus I bought back into Deere (DE), which I have traded at higher prices this year, perhaps making a buck or two but jumping out as I sensed the downtrend in the shares. DE is heading for its 175th birthday. It has seen a lot worse than the mess going on in Europe! The P/E is about 9X projected 201s earnings, and its CEO was on CNBC a day or two ago reaffirming guidance and saying that construction is doing well in the US of A. Value Line's "fair value" or "value line" for DE puts fair value at about $110, not the $75 it's now at.
Also, I scaled further back into AAPL, having largely gotten out around $620+ after the DOJ lawsuit broke and trading had gotten just too crazy in the stock. Meanwhile, Microsoft came out with some event this evening that announced something more than vaporware but less than an actual product-- and was thus in stark contrast to Apple's recent WWDC where actual products ready to be shipped were announced.
Here is a pretty funny take on the event:
http://news.cnet.com/8301-17938_105-57455730-1/who-is-the-microsoft-surface-for-exactly/?part=rss&subj=crave&tag=title&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+cnet%2FpRza+%28Crave%29
I also received an impressive e-mail from a techie who may be switching from PC's to the new Empire after being blown away by seeing the Retina display on Apple's new MacBook Pro 15 inch portable computer that was unveiled at the WWDC. He is looking at much higher AAPL prices, soon. Unlike yours truly, he actually knows the hardware-software industry as a veteran insider. I'll publish his comments in full if he allows me to.
With interest rates so low, patient money that does not have to mark to market and thus can ride out what might be a very stormy time in the weeks and months ahead will, I think, outperform most bonds with a truly select group of dominant equities that generate strong free cash flow.
Thus I have added select GARP companies to bond-like utility stocks as I have moved away from the highly-appreciated bonds that now have more risk than reward as I see it.
Also, I scaled further back into AAPL, having largely gotten out around $620+ after the DOJ lawsuit broke and trading had gotten just too crazy in the stock. Meanwhile, Microsoft came out with some event this evening that announced something more than vaporware but less than an actual product-- and was thus in stark contrast to Apple's recent WWDC where actual products ready to be shipped were announced.
Here is a pretty funny take on the event:
http://news.cnet.com/8301-17938_105-57455730-1/who-is-the-microsoft-surface-for-exactly/?part=rss&subj=crave&tag=title&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+cnet%2FpRza+%28Crave%29
I also received an impressive e-mail from a techie who may be switching from PC's to the new Empire after being blown away by seeing the Retina display on Apple's new MacBook Pro 15 inch portable computer that was unveiled at the WWDC. He is looking at much higher AAPL prices, soon. Unlike yours truly, he actually knows the hardware-software industry as a veteran insider. I'll publish his comments in full if he allows me to.
With interest rates so low, patient money that does not have to mark to market and thus can ride out what might be a very stormy time in the weeks and months ahead will, I think, outperform most bonds with a truly select group of dominant equities that generate strong free cash flow.
Thus I have added select GARP companies to bond-like utility stocks as I have moved away from the highly-appreciated bonds that now have more risk than reward as I see it.
Tuesday, September 21, 2010
Apple of the Public's Eye
I have more than once praised AAPL and gold as investments, such as on a Sept. 1 post. An article appeared today that indicates that Apple is playing in a different league than any of its corporate competitors, tech or otherwise. Per Secrets of Apple's customer success:
For the seventh straight year, Apple has topped its competitors in the PC industry in the University of Michigan's American Customer Satisfaction Index (ACSI), achieving a score of 86 out of 100. Its Apple's highest ranking since the annual survey began in 1995. . .
The Mac maker's nine-point lead is now the largest lead any company has over its competition in any of the 45 categories that the ACSI study surveys--including home appliances, gas stations, autos, e-commerce, airlines, and more.
AAPL is one of the few high quality large cap companies selling at a clear price-earnings ratio discount to its recent and prospective growth rate. Its growth comes with no debt, no leverage. And need anyone mention that its leadership role is in an intrinsically high-growth area, that of mobile information/communications? And that increasingly its growth is ex-U. S., and therefore it is itself an anti-dollar hedge?
If you think I like the stock, with appreciation for the substantial risks it and the overall stock market have, you are correct. Apple is sui generis. For a long time, that was a bad thing. Now it's the paragon- at a "GARP" discount to the market.
Caveat non-emptor?
Copyright (C) Long Lake LLC 2010
For the seventh straight year, Apple has topped its competitors in the PC industry in the University of Michigan's American Customer Satisfaction Index (ACSI), achieving a score of 86 out of 100. Its Apple's highest ranking since the annual survey began in 1995. . .
The Mac maker's nine-point lead is now the largest lead any company has over its competition in any of the 45 categories that the ACSI study surveys--including home appliances, gas stations, autos, e-commerce, airlines, and more.
AAPL is one of the few high quality large cap companies selling at a clear price-earnings ratio discount to its recent and prospective growth rate. Its growth comes with no debt, no leverage. And need anyone mention that its leadership role is in an intrinsically high-growth area, that of mobile information/communications? And that increasingly its growth is ex-U. S., and therefore it is itself an anti-dollar hedge?
If you think I like the stock, with appreciation for the substantial risks it and the overall stock market have, you are correct. Apple is sui generis. For a long time, that was a bad thing. Now it's the paragon- at a "GARP" discount to the market.
Caveat non-emptor?
Copyright (C) Long Lake LLC 2010
Sunday, September 12, 2010
Apple Continues to Excite Its Fans; AAPL not in a Stock Bubble Yet
The article from Canada, Hundreds camp out as Apple store opens, shows that the magic remains, at least in an area near Ontario:
Apple diehards waited in line through the night to get their hands on the latest high-tech gizmos as the company opened its first York Region store at Upper Canada Mall in Newmarket today.
By 8 a.m., hundreds had staked out a spot in a pair of lines that stretched in either direction from the Apple store’s glass-plated entrance. At the head of the throngs, hoping to score the coveted, yet highly elusive iPhone 4, was Richmond Hill’s Michael She. He and a contingent of friends and family had arrived at 9 p.m. last night to ensure they got one of the sought-after devices.
“I really want the iPhone 4,” Mr. She said. “You can’t find it anywhere else right now.”
One's reaction to this news, the entire article, and the general enthusiasm of Apple fans, may well be that this is cultish/bubble-type behavior. Or the reaction could be my considered one that given the inroads that the iPad, Mac line and even iPhone are making within businesses, what Apple has been doing is a legitimate series of innovations in a tech sector and economy that is short of new New things.
AAPL sells at a price-earnings ratio far less than its current and prospective 3-5 year growth rate. Given its clean financials, this makes it a classic "GARP" (growth-at-a-reasonable-price) stock. It is also hot in many overseas venues, as well. So AAPL fits my theme of investing in stocks with large international components. That Apple, the company, has a buzz among the public is better than if there were none, in this blogger's opinion. Perhaps an investing public burned by too much hype is correctly cautious with growth stocks.
In any case, the iPad may be the single hottest item for high-end gifts this fall; and iPods will be in favor for less costly gifts. Not to mention the iPhone and potential upside surprises with that line. AAPL continues to be a core holding in the DoctoRx portfolio.
Copyright (C) Long Lake LLC 2010
Apple diehards waited in line through the night to get their hands on the latest high-tech gizmos as the company opened its first York Region store at Upper Canada Mall in Newmarket today.
By 8 a.m., hundreds had staked out a spot in a pair of lines that stretched in either direction from the Apple store’s glass-plated entrance. At the head of the throngs, hoping to score the coveted, yet highly elusive iPhone 4, was Richmond Hill’s Michael She. He and a contingent of friends and family had arrived at 9 p.m. last night to ensure they got one of the sought-after devices.
“I really want the iPhone 4,” Mr. She said. “You can’t find it anywhere else right now.”
One's reaction to this news, the entire article, and the general enthusiasm of Apple fans, may well be that this is cultish/bubble-type behavior. Or the reaction could be my considered one that given the inroads that the iPad, Mac line and even iPhone are making within businesses, what Apple has been doing is a legitimate series of innovations in a tech sector and economy that is short of new New things.
AAPL sells at a price-earnings ratio far less than its current and prospective 3-5 year growth rate. Given its clean financials, this makes it a classic "GARP" (growth-at-a-reasonable-price) stock. It is also hot in many overseas venues, as well. So AAPL fits my theme of investing in stocks with large international components. That Apple, the company, has a buzz among the public is better than if there were none, in this blogger's opinion. Perhaps an investing public burned by too much hype is correctly cautious with growth stocks.
In any case, the iPad may be the single hottest item for high-end gifts this fall; and iPods will be in favor for less costly gifts. Not to mention the iPhone and potential upside surprises with that line. AAPL continues to be a core holding in the DoctoRx portfolio.
Copyright (C) Long Lake LLC 2010
Wednesday, September 1, 2010
Gold 'n Apple
The golden apple is an element that appears in various national and ethnic folk legends or fairy tales. Recurring themes depict a hero (e.g., Hercules or Făt-Frumos) retrieving the golden apples hidden or stolen by a monstrous antagonist. Alternatively, they are depicted as divine food and the source of immortality in Norse mythology.
Three golden Apples were featured in Greek mythology, in which a hunter named Atalanta raced against a suitor named Hippomenes who used the golden apples to distract her so that he could win the race . . .
(From Wikipedia)
Gold and Apple. Interesting how they have been linked over the millenia; they form ends of a barbell investing strategy for me at this time.
As an ongoing accumulator of AAPL stock, I am satisfied that it went up with a strong NASDAQ today. I am too old and out-of-it to use any of the stuff that Apple announced today, but it is good to see a blogger have very positive things to say. While not uniform, most reviews I saw on the 'Net were positive as well.
There are other product-related straws in the wind. Re the iPad, it's great to see the offbeat report that a private school in Scotland has shifted instruction entirely to the iPad. I never would have guessed; in fact, I traded out of AAPL stock after a 10% gain ($200 to $220) shortly before the iPad's introduction as I was worried it would be a disappointment. Given the success of this product and of the iPhone 4, along with the decline in interest rates which have made fixed income even less attractive, I am quite satisfied having bought back into the stock at somewhat higher prices.
Perhaps the most underappreciated news of the day is about the iPhone 4 and not today's presentation about the iPod line refreshment, iTV and the like. Worried about how the antenna controversy and/or Android are affecting sales? Here's a great headline for anyone who owns AAPL stock:
Apple unable to keep up with iPhone 4 demand, say execs
The brief article begins:
Apple is still unable to cope with interest in the iPhone 4, two of the company's key executives indicate. A Deutsche Bank analyst, Chris Whitmore, recently met with CFO Peter Oppenheimer and senior VP of retail Ron Johnson to discuss the state of sales. "iPhone 4 demand remains very robust and despite efforts to close the supply-demand imbalance and the continued supply ramp, Apple still cannot meet iPhone demand," Whitmore says of the discussion.
Yours truly is not a financial analyst. Looking at little more than seasonal consecutive quarter-on-quarter trends aligned with year-on-year comparisons, and also doing more than looking at the last 6 year's average price of AAPL stock to cash flow and earnings, I come up with a reasonable trading price of $450-500 for AAPL stock for some point in 2011. This derives from the Value Line chart which shows AAPL trading at about an average of 22X cash flow for the past 6 years. Of course, few traders forget that the third year of a President's term is usually a strong one for investors. (Of course, let's also not forget that the 3rd year of Herbert Hoover's term was not so hot.)
I am using $20/share for Apple's2011 calendar year earnings. (Apple is on a September fiscal year.)
Apple is growing at an amazing pace for a large company. In July, it preannounced $18 B for current quarter sales. Analysts are currently targeting $18 1/2 B. In its April 9 edition (merely 4 months ago), Value Line was predicting $14.8 B for current quarter sales. How often does a very large company have such a "beat"? I can't remember such an occurrence since the tech bubble.
So far as I can see, there is no undue speculation in AAPL stock. This does not guarantee positive returns, though. The stock will take a tumble if Steve Jobs retires. But I suspect that it is selling at about 15X CY 2010 and 12.5X CY 2011 earnings. Analysts have the company growing 18% per year over the next five years. In the past they have been conservative. These analysts thus have the stock at under 6X earnings 5 years from now. If Apple were selling 5-year debt, it would hardly pay any premium over Treasuries. So the prospective return from theoretical AAPL 5-year debt is perhaps 1.5% per year. Even if the stock is projected to sell for 9X earnings 5 years from now, it would then be projected to appreciate about 9% per year. This is quite an equity premium for a financial and operational powerhouse.
Compared to the S&P 500, AAPL is in far superior technical shape. The long-term 200 day (40 week) simple moving average of SPY (the ETF for the S&P 500)has begun to turn down. The 150 day sma is about to drop below the 200 day sma, and the 50 day sma is below both of them. SPY is now in a (mildly) bearish technical configuration. AAPL, in contrast, has bounced off its rising 150 day sma, which is properly aligned in a bull market configuration above a rising 200 day sma. AAPL is of course well above its 2007 high stock price of around $200/share, which at that time represented about 40 times its cash flow for CY 2007. I have been using the ability of a commodity or security to move to new highs compared with the pre-Lehman implosion as a sign of fundamental strength. I want to be invested where the charts are fundamentally "strong", given that I believe there are probably a few years of challenging economic and financial markets ahead of us in the U. S. (Thus I said positive things about MCD and CB recently based on operational and chart considerations.)
While from a sure thing (which does not exist in investing without illegal inside information), AAPL is similar to gold from an investment standpoint. Both marched on to new highs after the onset and current aftermath of the Great Recession/credit collapse/depression. Gold is within 2% of its all-time high and is up more than 30% from one year ago. AAPL is both further off its high but in an offsetting manner is up more than 50% above its year-ago price. Neither pays a dividend, and more and more people don't care about that, given that money of zero maturity (cash in the bank) pays little or nothing either.
AAPL and Au are also polar opposites. The former represents many of the best attributes of free market capitalism. It represents the future and appeals to techies and the young, among other groups. The latter appeals in many cases to older people who wish to preserve accumulated wealth against the ongoing Fed and governmental policies in many countries.
There are many cases where a "barbell" approach appeals to investors. This approach could involve holding cash and long bonds but no intermediate term bonds. For metals investors, it could involve holding gold and a very base metal, but not silver, platinum or semi-precious metal. For investment funds, I continue to find gold and AAPL stock as an interesting barbell approach to core investments in what continues to appear to be the bizarre world of central bank-mediated zero interest rates and federal deficits which despite the Summer of Recovery the administration promised two months ago show little sign of shrinking substantially.
Given the good news that iPhone demand apparently is "very robust" and added to a strong revamped iPod product line and rapid growth in iPad and core Mac sales, with growing exposure to sales outside of North America, I like the risk-reward in AAPL stock.
As a topic for another post, one reason I continue to "like" gold (meaning I give a Bronx cheer to Treasury's and the Fed's management of the dollar) is the price action of silver. Silver's 150 day sma has joined its 200 day sma as being in record territory (post 1980). Money-printing is pushing prices upward to record highs in MCD and to or near 12-month highs in CB, gold and silver.
The adage of "don't fight the Fed" continues to apply. I continue to look for the best risk-reward assets despite Fed policies I oppose. This takes some cognitive dissonance, but I'm liking the taste of golden apples so far.
Copyright (C) Long Lake LLC 2010
Three golden Apples were featured in Greek mythology, in which a hunter named Atalanta raced against a suitor named Hippomenes who used the golden apples to distract her so that he could win the race . . .
(From Wikipedia)
Gold and Apple. Interesting how they have been linked over the millenia; they form ends of a barbell investing strategy for me at this time.
As an ongoing accumulator of AAPL stock, I am satisfied that it went up with a strong NASDAQ today. I am too old and out-of-it to use any of the stuff that Apple announced today, but it is good to see a blogger have very positive things to say. While not uniform, most reviews I saw on the 'Net were positive as well.
There are other product-related straws in the wind. Re the iPad, it's great to see the offbeat report that a private school in Scotland has shifted instruction entirely to the iPad. I never would have guessed; in fact, I traded out of AAPL stock after a 10% gain ($200 to $220) shortly before the iPad's introduction as I was worried it would be a disappointment. Given the success of this product and of the iPhone 4, along with the decline in interest rates which have made fixed income even less attractive, I am quite satisfied having bought back into the stock at somewhat higher prices.
Perhaps the most underappreciated news of the day is about the iPhone 4 and not today's presentation about the iPod line refreshment, iTV and the like. Worried about how the antenna controversy and/or Android are affecting sales? Here's a great headline for anyone who owns AAPL stock:
Apple unable to keep up with iPhone 4 demand, say execs
The brief article begins:
Apple is still unable to cope with interest in the iPhone 4, two of the company's key executives indicate. A Deutsche Bank analyst, Chris Whitmore, recently met with CFO Peter Oppenheimer and senior VP of retail Ron Johnson to discuss the state of sales. "iPhone 4 demand remains very robust and despite efforts to close the supply-demand imbalance and the continued supply ramp, Apple still cannot meet iPhone demand," Whitmore says of the discussion.
Yours truly is not a financial analyst. Looking at little more than seasonal consecutive quarter-on-quarter trends aligned with year-on-year comparisons, and also doing more than looking at the last 6 year's average price of AAPL stock to cash flow and earnings, I come up with a reasonable trading price of $450-500 for AAPL stock for some point in 2011. This derives from the Value Line chart which shows AAPL trading at about an average of 22X cash flow for the past 6 years. Of course, few traders forget that the third year of a President's term is usually a strong one for investors. (Of course, let's also not forget that the 3rd year of Herbert Hoover's term was not so hot.)
I am using $20/share for Apple's2011 calendar year earnings. (Apple is on a September fiscal year.)
Apple is growing at an amazing pace for a large company. In July, it preannounced $18 B for current quarter sales. Analysts are currently targeting $18 1/2 B. In its April 9 edition (merely 4 months ago), Value Line was predicting $14.8 B for current quarter sales. How often does a very large company have such a "beat"? I can't remember such an occurrence since the tech bubble.
So far as I can see, there is no undue speculation in AAPL stock. This does not guarantee positive returns, though. The stock will take a tumble if Steve Jobs retires. But I suspect that it is selling at about 15X CY 2010 and 12.5X CY 2011 earnings. Analysts have the company growing 18% per year over the next five years. In the past they have been conservative. These analysts thus have the stock at under 6X earnings 5 years from now. If Apple were selling 5-year debt, it would hardly pay any premium over Treasuries. So the prospective return from theoretical AAPL 5-year debt is perhaps 1.5% per year. Even if the stock is projected to sell for 9X earnings 5 years from now, it would then be projected to appreciate about 9% per year. This is quite an equity premium for a financial and operational powerhouse.
Compared to the S&P 500, AAPL is in far superior technical shape. The long-term 200 day (40 week) simple moving average of SPY (the ETF for the S&P 500)has begun to turn down. The 150 day sma is about to drop below the 200 day sma, and the 50 day sma is below both of them. SPY is now in a (mildly) bearish technical configuration. AAPL, in contrast, has bounced off its rising 150 day sma, which is properly aligned in a bull market configuration above a rising 200 day sma. AAPL is of course well above its 2007 high stock price of around $200/share, which at that time represented about 40 times its cash flow for CY 2007. I have been using the ability of a commodity or security to move to new highs compared with the pre-Lehman implosion as a sign of fundamental strength. I want to be invested where the charts are fundamentally "strong", given that I believe there are probably a few years of challenging economic and financial markets ahead of us in the U. S. (Thus I said positive things about MCD and CB recently based on operational and chart considerations.)
While from a sure thing (which does not exist in investing without illegal inside information), AAPL is similar to gold from an investment standpoint. Both marched on to new highs after the onset and current aftermath of the Great Recession/credit collapse/depression. Gold is within 2% of its all-time high and is up more than 30% from one year ago. AAPL is both further off its high but in an offsetting manner is up more than 50% above its year-ago price. Neither pays a dividend, and more and more people don't care about that, given that money of zero maturity (cash in the bank) pays little or nothing either.
AAPL and Au are also polar opposites. The former represents many of the best attributes of free market capitalism. It represents the future and appeals to techies and the young, among other groups. The latter appeals in many cases to older people who wish to preserve accumulated wealth against the ongoing Fed and governmental policies in many countries.
There are many cases where a "barbell" approach appeals to investors. This approach could involve holding cash and long bonds but no intermediate term bonds. For metals investors, it could involve holding gold and a very base metal, but not silver, platinum or semi-precious metal. For investment funds, I continue to find gold and AAPL stock as an interesting barbell approach to core investments in what continues to appear to be the bizarre world of central bank-mediated zero interest rates and federal deficits which despite the Summer of Recovery the administration promised two months ago show little sign of shrinking substantially.
Given the good news that iPhone demand apparently is "very robust" and added to a strong revamped iPod product line and rapid growth in iPad and core Mac sales, with growing exposure to sales outside of North America, I like the risk-reward in AAPL stock.
As a topic for another post, one reason I continue to "like" gold (meaning I give a Bronx cheer to Treasury's and the Fed's management of the dollar) is the price action of silver. Silver's 150 day sma has joined its 200 day sma as being in record territory (post 1980). Money-printing is pushing prices upward to record highs in MCD and to or near 12-month highs in CB, gold and silver.
The adage of "don't fight the Fed" continues to apply. I continue to look for the best risk-reward assets despite Fed policies I oppose. This takes some cognitive dissonance, but I'm liking the taste of golden apples so far.
Copyright (C) Long Lake LLC 2010
Thursday, August 5, 2010
Apple Update
I have previously blogged about AAPL as one of the few stocks I like here for the long haul. Given receding concern about the iPhone 4's reception, one of the other many issues is the rise of Android software in various phones from various manufacturers. Will Android surpass iPhone's operating system?
My response as an AAPL investor is, is that the most important question? Is it winner take all, or Coke/Pepsi? Already the race is narrowing, per (among many writeups) Mobile apps now a "two-horse race" between Apple and Google, which begins:
Apple and Google combined will have almost complete dominance of mobile apps this year, ABI estimated today. It saw the field as now just a "two-horse race" between Android and iOS that would give the two 78 percent of all app downloads this year. Apple will still have the clear majority with over half, 52 percent, reaching iPads, iPhones and iPods.
Meanwhile, I believe that Google is giving away Android software, with all sorts of competitive implications, whereas AAPL is making lots of money today from iPhones and related mobile devices.
The entire field is booming. Here is a Bloomberg.com article about Japan, the elderly, and iPods titled This Is Your Grandfather’s IPad as Japan Elderly Embrace Apple. The beginning is engaging:
Hikosaburo Yasuda says he knows a trend when he sees one and plans to buy Apple Inc.’s iPad to keep up with junior members in his computer club. Yasuda is 95.
“It’s important to always try new things, otherwise you get left behind,” Yasuda said. “All these books in just one place, and so many familiar, classic titles that I’ve never had a chance to read. I want to buy the iPad just for that.”
The world is changing as the above article demonstrates. Apple is a prime mover in driving the change. The stock is trading at perhaps 16X calendar 2010 earnings with rapid secular growth occurring. There is no debt and to my knowledge little likelihood of a BP-type or AIG-type disaster scenario that could implode things. Whether the stock will prove to be better than cash or a bond is of course unknowable, but I own it as part of a diversified portfolio that has proportionally very little exposed to stocks other than ETFs that own physical precious metals.
Despite the worries over the iPhone, AAPL has a classic chart for a stock that could prove to have much more to run. I would be worried if it were anything like Cisco 10-11 years ago, selling at a ridiculous multiple in a hyped sector. As always, time will tell and readers must know that I am not an investment advisor and thus am offering no investment advice to anyone, and also may change my views at any time for any reason.
Copyright (C) Long Lake LLC 2010
My response as an AAPL investor is, is that the most important question? Is it winner take all, or Coke/Pepsi? Already the race is narrowing, per (among many writeups) Mobile apps now a "two-horse race" between Apple and Google, which begins:
Apple and Google combined will have almost complete dominance of mobile apps this year, ABI estimated today. It saw the field as now just a "two-horse race" between Android and iOS that would give the two 78 percent of all app downloads this year. Apple will still have the clear majority with over half, 52 percent, reaching iPads, iPhones and iPods.
Meanwhile, I believe that Google is giving away Android software, with all sorts of competitive implications, whereas AAPL is making lots of money today from iPhones and related mobile devices.
The entire field is booming. Here is a Bloomberg.com article about Japan, the elderly, and iPods titled This Is Your Grandfather’s IPad as Japan Elderly Embrace Apple. The beginning is engaging:
Hikosaburo Yasuda says he knows a trend when he sees one and plans to buy Apple Inc.’s iPad to keep up with junior members in his computer club. Yasuda is 95.
“It’s important to always try new things, otherwise you get left behind,” Yasuda said. “All these books in just one place, and so many familiar, classic titles that I’ve never had a chance to read. I want to buy the iPad just for that.”
The world is changing as the above article demonstrates. Apple is a prime mover in driving the change. The stock is trading at perhaps 16X calendar 2010 earnings with rapid secular growth occurring. There is no debt and to my knowledge little likelihood of a BP-type or AIG-type disaster scenario that could implode things. Whether the stock will prove to be better than cash or a bond is of course unknowable, but I own it as part of a diversified portfolio that has proportionally very little exposed to stocks other than ETFs that own physical precious metals.
Despite the worries over the iPhone, AAPL has a classic chart for a stock that could prove to have much more to run. I would be worried if it were anything like Cisco 10-11 years ago, selling at a ridiculous multiple in a hyped sector. As always, time will tell and readers must know that I am not an investment advisor and thus am offering no investment advice to anyone, and also may change my views at any time for any reason.
Copyright (C) Long Lake LLC 2010
Monday, July 12, 2010
You may have heard the headline that Consumer Reports can't recommend the iPhone 4 because of the famous sensitive point on the lower left side of the phone, even though this same phone tested BEST of all smart phones.
Click on list as shown on Digital Daily (linked to above).
This may be the opposite phenomenon to the exaggeration of Alcoa's earnings as a "surprise". Does someone at Consumer Reports have a short position in Apple, or a long interest in a competitor?
Given that Apple's evolving main competitor in smartphones is Google, and Google is everywhere, who knows?
Copyright (C) Long Lake LLC 2010
Thursday, July 1, 2010
iPhone Update: Look Carefully at the Model
iPhone 3G signal and reception complaints pour in
The complaints about the iPhone 4 may be unimportant to the ultimate value of Apple's stock. It looks as though we went through this 2 years ago. Time will tell.
Meanwhile by all measures of "GARP" investing, AAPL is quite cheap unless iPhone sales crater or some other unanticipated problems surface.
Copyright (C) Long Lake LLC 2010
The complaints about the iPhone 4 may be unimportant to the ultimate value of Apple's stock. It looks as though we went through this 2 years ago. Time will tell.
Meanwhile by all measures of "GARP" investing, AAPL is quite cheap unless iPhone sales crater or some other unanticipated problems surface.
Copyright (C) Long Lake LLC 2010
Monday, June 7, 2010
Gold'n Apple
Barry Ritholtz is out with a blog post with the respected technician Dick Arms pointing out that the extreme selling on Friday June 4 correlated with market bottoms in the past.
Only a similar amount of selling near the market peak in 2007.
And a similar amount of selling was seen Dec. 1 2008. But at that time the SPY was more than 30% below its 200 day moving average (smoothed). Now we are in the early stages of a market breakdown, so early that the 50 day sma is above the 200 day sma. We are not even in a bear market; there is little real fear that is the bottom-of-the-market/world-is-ending-type fear seen in late 2008/early 2009.
This was brought home this weekend in various small group encounters. Gold? It was as if I was from outer space, or a subversive.
The fact that gold is money according to the U. S. Government, IMF, China and Russia was not in people's minds.
Yet everyone I asked recently reports business down year on year. And last year, business was down vs. 2008.
The longer-term charts of gold and Apple both suggest that the current upswings in price have much more upside before they replicate growth surges off of prior intermediate highs. Apple could be selling for perhaps 10X 2012 earnings. That would be an earnings yield of 10%. Or you could get less than 1% yearly in a 2-year T-note. And gold is in a well-established bull market. Quite some time ago, Louise Yamada established a $1350/ounce intermediate price target for gold. Her longer-term targets start at $2000/ounce. In a liquidation panic a la October/November 2008, all babies get thrown out with bathwater, but the healthy ones rebound first.
Today's market action may have been telling. Gold approached another all-time high, yet only one current headline on Bloomberg.com mentions gold. Stocks get multiple mentions, as does the following that looks as though it comes from a ten-year old headline: Tech Lifts S.F. Prices as Ocean View Gets 26 Bids.
Here is the gold mention; it is being sold, not bought: Glencore may put gold assets on market, mulls IPO.
The subliminal message from the above is that gold is toppy, as the savvy Glencore looks to cash in on investor enthusiasm. And who knows? But this sort of action would be early, perhaps equivalent to NASDAQ 1000-1500 in the second half of the 1990s, not late 1999 when turkeys flew.
More sensible may be that of Rothschilds Bank; see Why Rothschilds is piling into gold, which begins:
Rothschild's Private Banking & Trust's head of investments Dirk Wiedmann has increased the firm's overweight positions in gold and hedge funds in preparation for further volatility and modest economic growth.
Wiedmann highlights short-term fixes for long term problems as a key headwind facing the global economy.
'The cracks in the financial system have been papered over and may not become critical for some time. Crucially, central banks will do all they can to prevent another recession. Policymakers will focus on short-term fixes and try to muddle through,' Wiedmann said. . .
Wiedmann expects gold prices to surge during the second half the year in an uncertain environment, comfortably breaking the $1,300 per ounce level - particularly if sovereign debt problems in Europe continue to escalate to a point where a break-up of the euro seems likely, he said.
For other commodities the firm has a neutral to negative outlook, arguing that buying opportunities may be emerging if financial markets stabilise.
Apple: secular, organic growth at a very cheap price/growth ratio and gilt-edged finances. Gold: The opposite, but public is not engaged and remains of the mindset that the thing to do is to own tiny minority shares of companies run by insiders for their own benefit, collectively comprising the "stock market". You can forget TRINS and sentiment indicators. What counts is what is happening in the real world. An overpriced group of mostly aging companies in league with poorly run governments are seeking price levels that take into account more risks than investors have been used to seeing come to fruition for quite some time.
Caveat emptor.
Copyright (C) Long Lake LLC 2010
Only a similar amount of selling near the market peak in 2007.
And a similar amount of selling was seen Dec. 1 2008. But at that time the SPY was more than 30% below its 200 day moving average (smoothed). Now we are in the early stages of a market breakdown, so early that the 50 day sma is above the 200 day sma. We are not even in a bear market; there is little real fear that is the bottom-of-the-market/world-is-ending-type fear seen in late 2008/early 2009.
This was brought home this weekend in various small group encounters. Gold? It was as if I was from outer space, or a subversive.
The fact that gold is money according to the U. S. Government, IMF, China and Russia was not in people's minds.
Yet everyone I asked recently reports business down year on year. And last year, business was down vs. 2008.
The longer-term charts of gold and Apple both suggest that the current upswings in price have much more upside before they replicate growth surges off of prior intermediate highs. Apple could be selling for perhaps 10X 2012 earnings. That would be an earnings yield of 10%. Or you could get less than 1% yearly in a 2-year T-note. And gold is in a well-established bull market. Quite some time ago, Louise Yamada established a $1350/ounce intermediate price target for gold. Her longer-term targets start at $2000/ounce. In a liquidation panic a la October/November 2008, all babies get thrown out with bathwater, but the healthy ones rebound first.
Today's market action may have been telling. Gold approached another all-time high, yet only one current headline on Bloomberg.com mentions gold. Stocks get multiple mentions, as does the following that looks as though it comes from a ten-year old headline: Tech Lifts S.F. Prices as Ocean View Gets 26 Bids.
Here is the gold mention; it is being sold, not bought: Glencore may put gold assets on market, mulls IPO.
The subliminal message from the above is that gold is toppy, as the savvy Glencore looks to cash in on investor enthusiasm. And who knows? But this sort of action would be early, perhaps equivalent to NASDAQ 1000-1500 in the second half of the 1990s, not late 1999 when turkeys flew.
More sensible may be that of Rothschilds Bank; see Why Rothschilds is piling into gold, which begins:
Rothschild's Private Banking & Trust's head of investments Dirk Wiedmann has increased the firm's overweight positions in gold and hedge funds in preparation for further volatility and modest economic growth.
Wiedmann highlights short-term fixes for long term problems as a key headwind facing the global economy.
'The cracks in the financial system have been papered over and may not become critical for some time. Crucially, central banks will do all they can to prevent another recession. Policymakers will focus on short-term fixes and try to muddle through,' Wiedmann said. . .
Wiedmann expects gold prices to surge during the second half the year in an uncertain environment, comfortably breaking the $1,300 per ounce level - particularly if sovereign debt problems in Europe continue to escalate to a point where a break-up of the euro seems likely, he said.
For other commodities the firm has a neutral to negative outlook, arguing that buying opportunities may be emerging if financial markets stabilise.
Apple: secular, organic growth at a very cheap price/growth ratio and gilt-edged finances. Gold: The opposite, but public is not engaged and remains of the mindset that the thing to do is to own tiny minority shares of companies run by insiders for their own benefit, collectively comprising the "stock market". You can forget TRINS and sentiment indicators. What counts is what is happening in the real world. An overpriced group of mostly aging companies in league with poorly run governments are seeking price levels that take into account more risks than investors have been used to seeing come to fruition for quite some time.
Caveat emptor.
Copyright (C) Long Lake LLC 2010
Thursday, June 3, 2010
The Apple of Corporate America's Eye?
Changewave Research (Emailed communication) reports that various Apple products are catching on in IT departments in corporations faster than mainstream analysts are projecting:
Apple. Planned corporate Mac buying has hit a new all time high, with 12% saying their company will be buying Mac laptops and 7% desktops in the 3rd quarter. . .
Surging Corporate iPad Demand. A total of 4% of respondents say their company has already purchased Apple iPad tablets – a very impressive number for a product less than two months on the market. Even more impressive, going forward 6% say their company plans on purchasing iPads in the next 90 days.
Apple. Planned corporate Mac buying has hit a new all time high, with 12% saying their company will be buying Mac laptops and 7% desktops in the 3rd quarter. . .
Surging Corporate iPad Demand. A total of 4% of respondents say their company has already purchased Apple iPad tablets – a very impressive number for a product less than two months on the market. Even more impressive, going forward 6% say their company plans on purchasing iPads in the next 90 days.
Also, every year, people who grew up recognizing the advantages of the Mac family and enjoying the iPod gain corporate market share, as it were, over the old-timers who are used to Wintel.
The kernel of the Mac family's operating system is intrinsically impervious to viruses. So the multiyear total cost of ownership can be less than for Wintel computers, and simpler.
No one knows, especially in a very dangerous global economy, but it would appear that with the so-far resounding success of the iPad, and with very clean finances, Apple Inc. is one of the few large companies with significant growth baked in the cake.
For what it's worth, AAPL and gold are seeing profit-taking today. It would be interesting if they start trading in a correlated fashion.
Copyright (C) Long Lake LLC 2010
Wednesday, June 2, 2010
As With Gold, So With Apple: Too Many Skeptics
Reihan Salam at The Daily Beast has just put out an article in which he says that he really likes Apple's products but is upset about income inequality in America (which has something to do with his point, he believes) and concludes by saying:
Apple won't be able to defy gravity forever. Short it now.
Now I don't know if Mr. Salam is a registered investment adviser; if he is not, he may be better advised to avoid direct instructions of the above sort.
The core point above is correct: nothing defies gravity forever. That was made clear much more persuasively by Marilyn in Diamonds Are a Girl's Best Friend:
"But square cut or pear shaped,
These rocks don't lose their shape . . .
Time rolls on and youth is gone
And you can't straighten up when you bend".
But so what? We, and our descendants, are all going to die. So there, Mr. Salam! Neither my point nor yours hits the mark.
The only point is whether AAPL is headed higher (given its lack of dividends). That's all. Social justice go bragh or not, Apple is probably running at an earnings rate of $15/share as I write. (Who knows outside of its top brass?) Earnings the past 5 years have almost doubled yearly. Given the recent accounting change, earnings this fiscal year are going to be more than double that of last year. And Uncle Sam isn't subsidizing its sales.
The only thing I can see is that it's the best I can find of a sorry lot of stocks. The technicals and fundamentals are in gear. The iPad is white hot.
Maybe one shouldn't own AAPL. If Mr. Jobs has a health issue, look out below. And the stock market is rolling over. But there's one in every crowd. In bull markets, perhaps 10% of stocks go down. And except for catastrophes such as in late 2008, some stocks go up in bears. To pay interest to a broker to borrow money to sell AAPL while it's in a historic growth phase while the rest of the consumer electronics sector struggles is extreme.
Right now, there's only one commodity with solid fundamentals and technicals I know. That's gold, of course, because it is not a commodity but a store of value that mostly does NOT get consumed as commodities do.
And amongst companies that make things, without getting into small-company world or very high P/E equities such as Intuitive Surgical, the equivalent of gold is AAPL. The stock is around $260. I have no way of guessing how much market share the iMac family is gaining, but soon enough we may be at or at least looking at $20/share of cash flow, and the "Value Line" for intrinsic fair value is now at 22X cash flow. Do the math.
Hint: Value Line's 2014 price target for AAPL was about $440, but that was before the blowout March quarter earnings were reported and before the iPad was on the market more than a week or so.
Short the stock? Huh?
Copyright (C) Long Lake LLC 2010
Apple won't be able to defy gravity forever. Short it now.
Now I don't know if Mr. Salam is a registered investment adviser; if he is not, he may be better advised to avoid direct instructions of the above sort.
The core point above is correct: nothing defies gravity forever. That was made clear much more persuasively by Marilyn in Diamonds Are a Girl's Best Friend:
"But square cut or pear shaped,
These rocks don't lose their shape . . .
Time rolls on and youth is gone
And you can't straighten up when you bend".
But so what? We, and our descendants, are all going to die. So there, Mr. Salam! Neither my point nor yours hits the mark.
The only point is whether AAPL is headed higher (given its lack of dividends). That's all. Social justice go bragh or not, Apple is probably running at an earnings rate of $15/share as I write. (Who knows outside of its top brass?) Earnings the past 5 years have almost doubled yearly. Given the recent accounting change, earnings this fiscal year are going to be more than double that of last year. And Uncle Sam isn't subsidizing its sales.
The only thing I can see is that it's the best I can find of a sorry lot of stocks. The technicals and fundamentals are in gear. The iPad is white hot.
Maybe one shouldn't own AAPL. If Mr. Jobs has a health issue, look out below. And the stock market is rolling over. But there's one in every crowd. In bull markets, perhaps 10% of stocks go down. And except for catastrophes such as in late 2008, some stocks go up in bears. To pay interest to a broker to borrow money to sell AAPL while it's in a historic growth phase while the rest of the consumer electronics sector struggles is extreme.
Right now, there's only one commodity with solid fundamentals and technicals I know. That's gold, of course, because it is not a commodity but a store of value that mostly does NOT get consumed as commodities do.
And amongst companies that make things, without getting into small-company world or very high P/E equities such as Intuitive Surgical, the equivalent of gold is AAPL. The stock is around $260. I have no way of guessing how much market share the iMac family is gaining, but soon enough we may be at or at least looking at $20/share of cash flow, and the "Value Line" for intrinsic fair value is now at 22X cash flow. Do the math.
Hint: Value Line's 2014 price target for AAPL was about $440, but that was before the blowout March quarter earnings were reported and before the iPad was on the market more than a week or so.
Short the stock? Huh?
Copyright (C) Long Lake LLC 2010
Friday, May 28, 2010
Apple's Business Accelerating as Economy Decelerates
In what passes for a sell-off in Apple stock world, AAPL is at a 5 week low in price.
It even briefly thrice dipped below its 50 day smoothed moving average only to bounce above it. Long lines have formed in multiple countries in Europe as well as in Japan to be in on their launch of the iPad.
A sort-of polling entity, Changewave Alliance, of which I am a member, is out today with survey results of its members. It has found an amazing satisfaction level with the iPad.
Fundamentally, the Value Line actual value line is as good a way to look for over- and under-valuation of growth stocks as any I know. For AAPL, the value line is set as 22X "cash flow", which for AAPL is very close to earnings. For calendar year 2010, I am guessing that AAPL with have cash flow of $15/share. Thus to be at its Value Line, it would be at $360. Yet more bullish is the fact that for the last 6 years, it has spent more time above than below this valuation level, despite rapidly rising profitability.
AAPL stock is 25% above its highest 2007 price with triple the earnings.
We are at a point in the economic cycle where discount retailers tend to stop outperforming. My favorites of Dollar Tree, Ross Stores and TJX are great companies, and their stocks remain reasonably valued, but with Wal-Mart struggling, one has to wonder if their margins have anywhere to go but down at this point.
Meanwhile the Economic Cycle Research Institute is out with more gloomy news today:
A measure of future U.S. economic growth fell to a 39-week low in the latest week, pointing to a slowdown in economic growth, a research group said on Friday.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 125.6 in the week ended May 21, down from a revised 127.2 the previous week, originally reported as 127.3.
That was the lowest level since Aug. 21, 2009, when the index stood at 125.3.
The index's annualized growth rate tumbled to a 47-week low of 5.1 percent from 9.0 percent a week ago. That's the worst level since June 26, 2009, when it stood at 4.6 percent.
"The downturn in WLI growth evident since early 2010 has recently intensified, so it should be no surprise when U.S. economic growth slows noticeably in the months ahead," said Lakshman Achuthan, managing director of ECRI.
Short-term rates are increasingly like to stay around zero for the indefinite future.
While this is ultimately bullish for gold given how our leaders handle economic sluggishness these days, ECRI's forecast is decidely not bullish for any other commodity, and with slowing economic growth likely per ECRI, fears of a new recession and perhaps the actuality may lead to another forced liquidation even of the highest quality assets such as gold at some point.
Right now AAPL may even be outshining gold. Yet the former can be laid low by a downturn in the health of one man, which is not the case for the latter.
To summarize, the list of attrative investments continues to narrow. Whether Treasuries will be on that list as growth slows is uncertain. One suspects so, but who really wants to lend money to the U. S. Gov't at 4% annually for the next 30 years?
Copyright (C) Long Lake LLC 2010
It even briefly thrice dipped below its 50 day smoothed moving average only to bounce above it. Long lines have formed in multiple countries in Europe as well as in Japan to be in on their launch of the iPad.
A sort-of polling entity, Changewave Alliance, of which I am a member, is out today with survey results of its members. It has found an amazing satisfaction level with the iPad.
Fundamentally, the Value Line actual value line is as good a way to look for over- and under-valuation of growth stocks as any I know. For AAPL, the value line is set as 22X "cash flow", which for AAPL is very close to earnings. For calendar year 2010, I am guessing that AAPL with have cash flow of $15/share. Thus to be at its Value Line, it would be at $360. Yet more bullish is the fact that for the last 6 years, it has spent more time above than below this valuation level, despite rapidly rising profitability.
AAPL stock is 25% above its highest 2007 price with triple the earnings.
We are at a point in the economic cycle where discount retailers tend to stop outperforming. My favorites of Dollar Tree, Ross Stores and TJX are great companies, and their stocks remain reasonably valued, but with Wal-Mart struggling, one has to wonder if their margins have anywhere to go but down at this point.
Meanwhile the Economic Cycle Research Institute is out with more gloomy news today:
A measure of future U.S. economic growth fell to a 39-week low in the latest week, pointing to a slowdown in economic growth, a research group said on Friday.
The Economic Cycle Research Institute, a New York-based independent forecasting group, said its Weekly Leading Index fell to 125.6 in the week ended May 21, down from a revised 127.2 the previous week, originally reported as 127.3.
That was the lowest level since Aug. 21, 2009, when the index stood at 125.3.
The index's annualized growth rate tumbled to a 47-week low of 5.1 percent from 9.0 percent a week ago. That's the worst level since June 26, 2009, when it stood at 4.6 percent.
"The downturn in WLI growth evident since early 2010 has recently intensified, so it should be no surprise when U.S. economic growth slows noticeably in the months ahead," said Lakshman Achuthan, managing director of ECRI.
Short-term rates are increasingly like to stay around zero for the indefinite future.
While this is ultimately bullish for gold given how our leaders handle economic sluggishness these days, ECRI's forecast is decidely not bullish for any other commodity, and with slowing economic growth likely per ECRI, fears of a new recession and perhaps the actuality may lead to another forced liquidation even of the highest quality assets such as gold at some point.
Right now AAPL may even be outshining gold. Yet the former can be laid low by a downturn in the health of one man, which is not the case for the latter.
To summarize, the list of attrative investments continues to narrow. Whether Treasuries will be on that list as growth slows is uncertain. One suspects so, but who really wants to lend money to the U. S. Gov't at 4% annually for the next 30 years?
Copyright (C) Long Lake LLC 2010
Wednesday, July 22, 2009
More Frothy Signs in Stocks as Pushers Get Desperate
How the mood has changed from the despair of this winter and last fall!
Perusing the headlines of Barron's online makes one think it's 1999, not 2009. Forget the bull noises about Apple (breathlessly reported is that it has $31 B in cash (which it does not)). The truth is that Apple has never paid a dividend, may never pay a dividend, and sells for about $110 billion dollars more than it is worth under generally accepted accounting principles. A mere 5 years ago, AAPL sold for one-tenth its current share price. Are you sure that the iPod won't become a commodity item, the iPhone the same, and the computer business won't get overwhelmed by the next new things? And that Steve Jobs can continue to work?
Also ignore that a bull market winner, Family Dollar (FDO) has a CEO who just unloaded $7 M worth of stock. You, the little guy, should buy and hold. (And FDO is one of the "good guy" companies in EBR's book.)
Ignore that Barron's is leading off with a pitch for Siemens, one of the most corrupt companies around ("Bribery was Siemens's business model," said Uwe Dolata, the spokesman for the association of federal criminal investigators in Germany---from PBS.org).
Here's the first scary thing:
Leaving U.S. Stocks for Foreign Opportunities
Subscriber Content Read Preview
Financial adviser Dawn Bennett has dumped domestic equities for emerging markets such as Peru and China.
When Barron's expects you to pay money to get "subscriber content" so you can read about some kid who is long Peru when you can buy Eli Lilly or BMS for 8-10 times earnings and a secure 6% yield, IBM for 11 times earnings, and P&G on a down year for 15 times earnings, you should realize that things are frothy. (This comment is NOT a market timing tool; remember "irrational exuberance" was correct but 3 years early--December 1996.)
Here's the second scary thing:
Hot Research PM
AMD Ready to Advance
Subscriber Content Read Preview
FBR Capital Markets upgraded the chip maker to Outperform
Per the Yahoo/Finance AMD chart, the stock has gone down for the last 26 years. It has a negative tangible net worth. It is down about 10% after hours due to results so poor that even most of Wall Street's paid optimists want to dump it. Yet Barron's, once a bastion of reality-based investing, chooses to highlight perhaps the one shop
that upgrades this over-promising, under-delivering company.
AMD has never paid a dividend. If you had bought the stock 26 years ago, you would be down by half. If you had done something really risky and invested in and rolled over 1-year FDIC-insured CD's, you would have approximately quadrupled your money. Yet, only a few years ago, AMD was about 10 times higher than it is now. (I hope that's not a cautionary predictor for Apple Inc., but that's why I mention both companies in the same post.)
The truth as seen here at EBR is that this is probably the most confusing time for an investor in an investing lifetime. Perhaps the closest is the 1973-5 upsetting of the then-orthodoxy that recession and high inflation were incompatible. But $23.7 TRILLION of government intervention down the road for such little economic results, and promises from a campaigning-for-renomination Ben Bernanke that small savers will continue to be forced to subsidize JPMorgan Chase et al for a "considerable" length of time, make all predictions chancy.
But when you take it one day at a time, you can't help but worry when stocks such as Eaton shoot up- aided by Jim Cramer's hype- just as their sales and earnings collapse, and Barron's wants to charge you money to be exposed to such bull---- market idiocy as getting rich off of Peruvian stocks or by buying one of the worst-performing large tech companies known to man.
Copyright (C) Long Lake LLC 2009
Perusing the headlines of Barron's online makes one think it's 1999, not 2009. Forget the bull noises about Apple (breathlessly reported is that it has $31 B in cash (which it does not)). The truth is that Apple has never paid a dividend, may never pay a dividend, and sells for about $110 billion dollars more than it is worth under generally accepted accounting principles. A mere 5 years ago, AAPL sold for one-tenth its current share price. Are you sure that the iPod won't become a commodity item, the iPhone the same, and the computer business won't get overwhelmed by the next new things? And that Steve Jobs can continue to work?
Also ignore that a bull market winner, Family Dollar (FDO) has a CEO who just unloaded $7 M worth of stock. You, the little guy, should buy and hold. (And FDO is one of the "good guy" companies in EBR's book.)
Ignore that Barron's is leading off with a pitch for Siemens, one of the most corrupt companies around ("Bribery was Siemens's business model," said Uwe Dolata, the spokesman for the association of federal criminal investigators in Germany---from PBS.org).
Here's the first scary thing:
Leaving U.S. Stocks for Foreign Opportunities
Subscriber Content Read Preview
Financial adviser Dawn Bennett has dumped domestic equities for emerging markets such as Peru and China.
When Barron's expects you to pay money to get "subscriber content" so you can read about some kid who is long Peru when you can buy Eli Lilly or BMS for 8-10 times earnings and a secure 6% yield, IBM for 11 times earnings, and P&G on a down year for 15 times earnings, you should realize that things are frothy. (This comment is NOT a market timing tool; remember "irrational exuberance" was correct but 3 years early--December 1996.)
Here's the second scary thing:
Hot Research PM
AMD Ready to Advance
Subscriber Content Read Preview
FBR Capital Markets upgraded the chip maker to Outperform
Per the Yahoo/Finance AMD chart, the stock has gone down for the last 26 years. It has a negative tangible net worth. It is down about 10% after hours due to results so poor that even most of Wall Street's paid optimists want to dump it. Yet Barron's, once a bastion of reality-based investing, chooses to highlight perhaps the one shop
that upgrades this over-promising, under-delivering company.
AMD has never paid a dividend. If you had bought the stock 26 years ago, you would be down by half. If you had done something really risky and invested in and rolled over 1-year FDIC-insured CD's, you would have approximately quadrupled your money. Yet, only a few years ago, AMD was about 10 times higher than it is now. (I hope that's not a cautionary predictor for Apple Inc., but that's why I mention both companies in the same post.)
The truth as seen here at EBR is that this is probably the most confusing time for an investor in an investing lifetime. Perhaps the closest is the 1973-5 upsetting of the then-orthodoxy that recession and high inflation were incompatible. But $23.7 TRILLION of government intervention down the road for such little economic results, and promises from a campaigning-for-renomination Ben Bernanke that small savers will continue to be forced to subsidize JPMorgan Chase et al for a "considerable" length of time, make all predictions chancy.
But when you take it one day at a time, you can't help but worry when stocks such as Eaton shoot up- aided by Jim Cramer's hype- just as their sales and earnings collapse, and Barron's wants to charge you money to be exposed to such bull---- market idiocy as getting rich off of Peruvian stocks or by buying one of the worst-performing large tech companies known to man.
Copyright (C) Long Lake LLC 2009
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