Author Topic: Buy Apple now?  (Read 10454 times)

goodrookie

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Buy Apple now?
« on: December 29, 2014, 09:27:12 PM »
Or wait unless a pullback?
How do you guys decide when to buy on the stocks that are already going up?

GGNoob

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Re: Buy Apple now?
« Reply #1 on: December 29, 2014, 09:37:36 PM »
Time in the market is usually better than timing the market. I'd say just buy it now.


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iamlindoro

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Re: Buy Apple now?
« Reply #2 on: December 29, 2014, 09:40:02 PM »
I buy Apple all the time. 

It's about 3% of every share of VTSAX I buy.

surfhb

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Re: Buy Apple now?
« Reply #3 on: December 29, 2014, 10:02:17 PM »
I buy Apple all the time. 

It's about 3% of every share of VTSAX I buy.

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Frugal_Red

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Re: Buy Apple now?
« Reply #4 on: December 29, 2014, 10:10:49 PM »
I agree with iamlindoro, I buy Apple every time I purchase XLK.  An ETF limits your risk while still giving you exposure.  Sure it may not be as glamorous as saying 'I own Apple' but it is better in the long run!

innerscorecard

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Re: Buy Apple now?
« Reply #5 on: December 29, 2014, 10:55:10 PM »
I am a long-term AAPL shareholder.

But if you are asking this question like this - you are guaranteed to eventually lose money, and should not be investing in individual stocks.

What is your estimate of the company's intrinsic value and how did you derive it? If you don't have a good answer to this question, you shouldn't be buying individual stocks, as you wouldn't know when to buy and when to sell. You'd just forever be asking your question - "is this a good time to buy?"

fartface

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Re: Buy Apple now?
« Reply #6 on: December 30, 2014, 01:33:00 AM »
I buy Apple all the time. 

It's about 3% of every share of VTSAX I buy.

2 Thumps UP

Dollar cost average each month. When the market pulled back in early October, I threw an extra 5K into VTSAX...

RapmasterD

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Re: Buy Apple now?
« Reply #7 on: December 30, 2014, 06:52:51 PM »
I'm with fartface. Luckily not in the same room, however.

fartface

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Re: Buy Apple now?
« Reply #8 on: December 30, 2014, 09:05:09 PM »
I'm with fartface. Luckily not in the same room, however.

ha ha ha ha G1!

rmendpara

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Re: Buy Apple now?
« Reply #9 on: December 30, 2014, 09:43:56 PM »
Or wait unless a pullback?
How do you guys decide when to buy on the stocks that are already going up?

Do you know how to value a stock, whether it's AAPL, CMG, UTX, PFE, or any other stock?

If not, don't start buying stocks randomly because you know the product. It's a recipe for learning hard lessons.

goodrookie

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Re: Buy Apple now?
« Reply #10 on: December 31, 2014, 08:30:06 PM »
The right answer: wait for a pullback. Had I taken your advice (Mr. Logan), I would be out of $3 per stock!

But seriously, how do you guys as an individual investor decide how much a stock should be worth? So far, I use P/E, Earning estimates, 1 yr chart and "cheap" analyst report that I get from my online broker's service (not worth much but it gives a baseline).

rmendpara, let's take UTX. My estimate is $114 at the end of January and $120 in the long term (6-12 months). What would be your target?

iamlindoro

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Re: Buy Apple now?
« Reply #11 on: December 31, 2014, 08:35:35 PM »
The right answer: wait for a pullback. Had I taken your advice (Mr. Logan), I would be out of $3 per stock!

Only if you bought at that time, then sold today.  Day trading isn't really what most of us do here.  We're in this for the long haul.  Buy and hold. 

Asking on internet forums whether you should buy, or when to buy, a given stock is another sign that you should probably rethink your approach.  I couldn't help but notice your screen name-- if you want to live up to it, you may want to consider doing some more reading here.  I would highly recommend the jlcollinsnh stock series in particular.

http://jlcollinsnh.com/stock-series/

goodrookie

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Re: Buy Apple now?
« Reply #12 on: January 04, 2015, 02:51:45 PM »
Not day trading. The question was not limited to Apple. The question was if a stock has a good long term target price, is it or not better to buy without paying regards to the trends, especially when it is already going up. You probably think it does not matter-you can't time the market. But I say it does. If a stock is already up, wait for a pullback. Everything that goes up will eventually come down for a while (Apple included).

Assuming $120 target price, the $3 difference in buying stock mean a lot even in long term because the denominator is smaller.
@ 113, profit = (120-113)/113 = 6.1%
@ 110, profit = (120-110)/110 = 9%
Also, let's not forget you are risking less capital. So, you have better diversification even if you left it unused as cash.

FarmerPete

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Re: Buy Apple now?
« Reply #13 on: January 04, 2015, 05:14:21 PM »
...But I say it does. If a stock is already up, wait for a pullback. Everything that goes up will eventually come down for a while (Apple included).

First, stop trying to time the market.  If you are really interested in buying AAPL, feel it's currently undervalued, but you'd like to buy in to it for a little less than the current price, I recommend selling some put options.  AAPL is currently at $109.33.  You could sell a march 20th put contract with a $105 strike price for $4.20. Basically you'll break even or do better than even unless AAPL goes below $100.80, and regardless, you'll be doing better than just buying AAPL today unless it goes up more than $4.20 a share in the next 3 months.  Just make sure you have enough cash to cover the purchase of the AAPL if it comes to that.

iamlindoro

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Re: Buy Apple now?
« Reply #14 on: January 04, 2015, 06:31:24 PM »
Everything that goes up will eventually come down for a while (Apple included).

Sorry, but that's not correct.  This statement presupposes that you can conclude a stock has reached a peak, which you cannot.  There is no way of predicting that a stock has reached a high that it must fall from versus continuing substantially higher, then pulling back.  There is no way for you to know that it won't go to 150, then pull back to 140.  Thus, the attempt to time the market is just as likely to harm you as help you.

arebelspy

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Re: Buy Apple now?
« Reply #15 on: January 05, 2015, 09:51:46 AM »
Assuming $120 target price, the $3 difference in buying stock mean a lot even in long term because the denominator is smaller.
@ 113, profit = (120-113)/113 = 6.1%
@ 110, profit = (120-110)/110 = 9%

No.  Again, you are presuming selling at 120, which gives you nearly 50% more return in your number.

What if you decide 120 is fair value, but have no intent to sell ever, because you want to own that company?  So your timeframe is more like 40+ years?

That means your price by that point will probably be more like 2600.  2600-113/113 = 2200%.  2263%.  A difference between the two of less than 3% of the overall growth (63% more absolute on 2600% = ~3%).  That's a lot smaller than the 50% you calculated.

And since you can't predict the future, it very well may have gone up in the time you're trying to time it.
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index

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Re: Buy Apple now?
« Reply #16 on: January 05, 2015, 11:30:10 AM »
Assuming $120 target price, the $3 difference in buying stock mean a lot even in long term because the denominator is smaller.
@ 113, profit = (120-113)/113 = 6.1%
@ 110, profit = (120-110)/110 = 9%

No.  Again, you are presuming selling at 120, which gives you nearly 50% more return in your number.

What if you decide 120 is fair value, but have no intent to sell ever, because you want to own that company?  So your timeframe is more like 40+ years?

That means your price by that point will probably be more like 2600.  2600-113/113 = 2200%.  2263%.  A difference between the two of less than 3% of the overall growth (63% more absolute on 2600% = ~3%).  That's a lot smaller than the 50% you calculated.

And since you can't predict the future, it very well may have gone up in the time you're trying to time it.

For Apple to have a price of $2600 it would have a market cap of 15.5T. This is about the size of the entire S&P 500 right now... Not going to happen. 

Apple is worth $120 based on what? Spend some time learning how to analyze companies.

Have you read Apple's annual report?

Read:

The Intelligent Investor
Security Analysis
Margin of Safety

I you don't understand:
http://finance.yahoo.com/q/is?s=AAPL+Income+Statement&annual
http://finance.yahoo.com/q/bs?s=AAPL+Balance+Sheet&annual
http://finance.yahoo.com/q/cf?s=AAPL+Cash+Flow&annual

You have no business investing in Apple or any other company's stock.

You need to do your homework. If you want help, find a forum where users are knowledgeable of more than indexing. If you had read a dozen posts on this forum, you would know this is the wrong place to ask your question.

goodrookie

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Re: Buy Apple now?
« Reply #17 on: January 05, 2015, 09:13:54 PM »
@arebelspy: AAPL can NOT be anything more than $250 in FIVE year period. Realistically, my prediction is $170-180 in 2020.  To get beyond that price, it need to invent something really big. But what's there left to invent? Knight Rider car? Mind reading machine?

@index: indexing is not the answer unless you depend on your stocks for significant amount of your income. let's think about this: any real difference between owning 20 stocks vs 100+ stocks? at that point, you are losing much more in potential profit than gaining in risk management because you are essentially throwing darts at random stocks. (Pricing an ETF is also much difficult than pricing an stock.) Just curious, what is your 1 year target for AAPL?

arebelspy

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Re: Buy Apple now?
« Reply #18 on: January 05, 2015, 09:21:49 PM »
@arebelspy: AAPL can NOT be anything more than $250 in FIVE year period. Realistically, my prediction is $170-180 in 2020.  To get beyond that price, it need to invent something really big. But what's there left to invent? Knight Rider car? Mind reading machine?

So I have to sell then in a five year period?  What if my holding period is much, much longer than that?

Just curious, what is your 1 year target for AAPL?

Most of us aren't interested in what an individual stock will do in one year, but if we want to hold it for decades.
« Last Edit: January 05, 2015, 09:23:52 PM by arebelspy »
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arebelspy

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Re: Buy Apple now?
« Reply #19 on: January 05, 2015, 09:23:11 PM »
@arebelspy: AAPL can NOT be anything more than $250 in FIVE year period. Realistically, my prediction is $170-180 in 2020.  To get beyond that price, it need to invent something really big. But what's there left to invent? Knight Rider car? Mind reading machine?

@index: indexing is not the answer unless you depend on your stocks for significant amount of your income. let's think about this: any real difference between owning 20 stocks vs 100+ stocks? at that point, you are losing much more in potential profit than gaining in risk management because you are essentially throwing darts at random stocks. (Pricing an ETF is also much difficult than pricing an stock.) Just curious, what is your 1 year target for AAPL?

No, trying to pick them you're doing that.  Indexing you're admitting that you can't beat the random walk, and you'll take the average (performance) as a way to beat the average (investor).
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innerscorecard

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Re: Buy Apple now?
« Reply #20 on: January 05, 2015, 11:04:24 PM »
@arebelspy: AAPL can NOT be anything more than $250 in FIVE year period. Realistically, my prediction is $170-180 in 2020.  To get beyond that price, it need to invent something really big. But what's there left to invent? Knight Rider car? Mind reading machine?

@index: indexing is not the answer unless you depend on your stocks for significant amount of your income. let's think about this: any real difference between owning 20 stocks vs 100+ stocks? at that point, you are losing much more in potential profit than gaining in risk management because you are essentially throwing darts at random stocks. (Pricing an ETF is also much difficult than pricing an stock.) Just curious, what is your 1 year target for AAPL?

In addition to what arebelspy said above, there's no reason the price of Apple can't be over $250 per share. (I'm not saying it will and I'm not saying it won't.) Inventing things isn't the only way to grow per-share-value. There's also buybacks, which while not increasing the company's market cap, will increase the value of each share. If Apple aggressively spent all its cash on buybacks even more so than now, and even took on a lot of debt to do so, there's no reason the stock couldn't go up to $200-$250. It would be bad for the company, but if the goal was simply to increase the stock price, that's one easy way to do it.
« Last Edit: January 06, 2015, 07:49:10 PM by innerscorecard »

index

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Re: Buy Apple now?
« Reply #21 on: January 06, 2015, 08:35:51 AM »
@index: indexing is not the answer unless you depend on your stocks for significant amount of your income. let's think about this: any real difference between owning 20 stocks vs 100+ stocks? at that point, you are losing much more in potential profit than gaining in risk management because you are essentially throwing darts at random stocks. (Pricing an ETF is also much difficult than pricing an stock.) Just curious, what is your 1 year target for AAPL?

I'm confused. I never said anything about indexing. I actually gave you some reading material if you want to select your own investments...

I agree that pricing an ETF is much more difficult than an individual stock, but you haven't said a single thing that leads me to believe you know how to price an individual stock. Hence my book recommendations.

As far as Apple stock is concerned; I don't have an opinion or price target. They are a 635B company. For Apple stock to double, it would be larger by market cap than the entire Energy Sector of the S&P 500 - Exxon, Chevron, Schlumberger, Kinder Morgan, ConocoPhillips, Anadarko, etc... etc... etc...  COMBINED.

I am interested in investing in companies that:

1- Have a long growth runway - I look at their revenue vs their addressable market.

2- Have great management - Does management treat shareholders as partners? Is their thinking long term or are they interested in propping up stock price in the short term by hiding expenses or buying back stock when the price is high?

3- Have a high return on invested capital - Its hard compound value quickly if you are spending 95c to make $1.

4- Have a defensible moat - Why do customers stay with the business? How sensitive is the business to the overall economy? Could you replicate the business if you had their market cap in cash?

5- The company is tax efficient - It is easier to grow your business if you are not giving half your profits away in taxes. Some companies and industries - insurance float, cable, RR, distribution, etc.. are more tax efficient than others.

You should develop your own checklist, but to do that you need a basic understanding of finance and investing. Once you have spent a significant amount of time learning how to invest, you may discover you do not have the temperament to invest in individual companies anyway.

Look at it this way:

You need to spend 1000 hours learning before you do anything. After 1000 hours there is a 50/50 chance you are not going to be good at it anyway (you need to be honest with yourself). If you are willing to invest that kind of time go for it. If not index.

innerscorecard

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Re: Buy Apple now?
« Reply #22 on: January 06, 2015, 08:57:40 AM »
@index: indexing is not the answer unless you depend on your stocks for significant amount of your income. let's think about this: any real difference between owning 20 stocks vs 100+ stocks? at that point, you are losing much more in potential profit than gaining in risk management because you are essentially throwing darts at random stocks. (Pricing an ETF is also much difficult than pricing an stock.) Just curious, what is your 1 year target for AAPL?

I'm confused. I never said anything about indexing. I actually gave you some reading material if you want to select your own investments...

I agree that pricing an ETF is much more difficult than an individual stock, but you haven't said a single thing that leads me to believe you know how to price an individual stock. Hence my book recommendations.

As far as Apple stock is concerned; I don't have an opinion or price target. They are a 635B company. For Apple stock to double, it would be larger by market cap than the entire Energy Sector of the S&P 500 - Exxon, Chevron, Schlumberger, Kinder Morgan, ConocoPhillips, Anadarko, etc... etc... etc...  COMBINED.

I am interested in investing in companies that:

1- Have a long growth runway - I look at their revenue vs their addressable market.

2- Have great management - Does management treat shareholders as partners? Is their thinking long term or are they interested in propping up stock price in the short term by hiding expenses or buying back stock when the price is high?

3- Have a high return on invested capital - Its hard compound value quickly if you are spending 95c to make $1.

4- Have a defensible moat - Why do customers stay with the business? How sensitive is the business to the overall economy? Could you replicate the business if you had their market cap in cash?

5- The company is tax efficient - It is easier to grow your business if you are not giving half your profits away in taxes. Some companies and industries - insurance float, cable, RR, distribution, etc.. are more tax efficient than others.

You should develop your own checklist, but to do that you need a basic understanding of finance and investing. Once you have spent a significant amount of time learning how to invest, you may discover you do not have the temperament to invest in individual companies anyway.

Look at it this way:

You need to spend 1000 hours learning before you do anything. After 1000 hours there is a 50/50 chance you are not going to be good at it anyway (you need to be honest with yourself). If you are willing to invest that kind of time go for it. If not index.

Doubling the market cap isn't necessary for the stock to double. The company can eat itself instead with buybacks, which will be a huge amplifier.

index

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Re: Buy Apple now?
« Reply #23 on: January 06, 2015, 10:40:35 AM »
Doubling the market cap isn't necessary for the stock to double. The company can eat itself instead with buybacks, which will be a huge amplifier.

True. They've got about 36B in free cash flow to use for dividends/buybacks. 11B in dividends means they've got 25B to use for buybacks which puts them at a ~13 years for a double. 13 years is a long time for a consumer electronics company though. They must continue to have one hit after another to maintain their status quo. What if the popularity of their devices wanes or they have a flop?

I'd be a lot more comfortable with Apple if they produced a boring product everyone needed, but their margins are similar to a fashion company in their prime. Margins are hard to maintain at ~30%. Even if they maintained them at 20% LT (twice that of a typical consumer electronics company) their FCF would be cut by a third. Revenue growth has fallen to mid single digits meaning their is no room for error. 

innerscorecard

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Re: Buy Apple now?
« Reply #24 on: January 06, 2015, 07:53:25 PM »
Doubling the market cap isn't necessary for the stock to double. The company can eat itself instead with buybacks, which will be a huge amplifier.

True. They've got about 36B in free cash flow to use for dividends/buybacks. 11B in dividends means they've got 25B to use for buybacks which puts them at a ~13 years for a double. 13 years is a long time for a consumer electronics company though. They must continue to have one hit after another to maintain their status quo. What if the popularity of their devices wanes or they have a flop?

I'd be a lot more comfortable with Apple if they produced a boring product everyone needed, but their margins are similar to a fashion company in their prime. Margins are hard to maintain at ~30%. Even if they maintained them at 20% LT (twice that of a typical consumer electronics company) their FCF would be cut by a third. Revenue growth has fallen to mid single digits meaning their is no room for error.

You're ignoring the current cash pile, which isn't fully valued by the market. Corporate tax reform could be an unexpected (although very low-probability in my opinion) bonanza for this. Apple also borrows at extremely low rates as evidenced by the recent bond issues.

Everyone always thinks Apple will collapse immediately, but they are wrong. They're been wrong for a very long time. Apple is one of the few companies that has navigated all eras of personal computing (PC, Internet, Mobile) and looks like the best one to navigate the next era (Wearables) due to its integration and control of hardware, software and services. It has a sustainable culture of product innovation allows it to generate hits. It's like a movie studio or a pharmaceutical company - it's a process of innovation - and innovation in terms of finding out what jobs there are to be done, not merely creating novelties, as is the common misconception.

Not only that, the company is still cheaper than the market, so there is a higher chance of P/E expansion than compression.

FarmerPete

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Re: Buy Apple now?
« Reply #25 on: January 07, 2015, 07:43:30 AM »
I know the PC market has been shrinking the last few years, but I personally think that Apple has a lot of potential to take more market share of it.  I can't find it now, but I know I've seen numbers indicating that Apple laptops have over a 50% market share for college students.  That Apple fanboyism is sure to filter down as people get older.  If Apple can get a bigger foot into the enterprise/business market, their sales numbers could explode.  Right now, they've got like a 10% market share in the computer world.

Really though, Apple should not be a speculative stock choice.  They are a solid earner, and when you remove their cash from the stock price, they have a very compelling multiple.  If I wanted to be more speculative, I'd invest in Tesla.  I also think that Google has a bigger chance for a surprise upwards run.  Google is always working on so many side projects with great potential.  They have multiple projects that could cause the stock to skyrocket.  Having said that, I'd much rather sludge through 7% returns by investing in an index than risk stagnant returns by investing in Apple or Google.  I tend to keep my individual stock picks to be minimal and fairly stable companies.  Now, if I really wanted to make money, I would try to come up with a way to cash in on all the baby boomers hitting retirement.  I find you need to think outside the box for stuff like this, otherwise it will already be baked in to the price.  I'm thinking that travel might do well.  Medical is a big question mark in my book.  It should do well with the aging obese boomers, but I don't think we're going to go too much longer before our healthcare system is overhauled, collapses, or both.

James

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Re: Buy Apple now?
« Reply #26 on: January 07, 2015, 08:11:30 AM »
@index: indexing is not the answer unless you depend on your stocks for significant amount of your income. let's think about this: any real difference between owning 20 stocks vs 100+ stocks? at that point, you are losing much more in potential profit than gaining in risk management because you are essentially throwing darts at random stocks. (Pricing an ETF is also much difficult than pricing an stock.) Just curious, what is your 1 year target for AAPL?

A fool and his money are soon parted... ;)

I suggest you not invest in individual stocks. The debate regarding index funds is all over this forum and others, I feel no need to recreate it in this thread. Not saying individual stocks are wrong for everyone, but if you have to ask...

index

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Re: Buy Apple now?
« Reply #27 on: January 07, 2015, 08:48:55 AM »

You're ignoring the current cash pile, which isn't fully valued by the market. Corporate tax reform could be an unexpected (although very low-probability in my opinion) bonanza for this. Apple also borrows at extremely low rates as evidenced by the recent bond issues.

Everyone always thinks Apple will collapse immediately, but they are wrong. They're been wrong for a very long time. Apple is one of the few companies that has navigated all eras of personal computing (PC, Internet, Mobile) and looks like the best one to navigate the next era (Wearables) due to its integration and control of hardware, software and services. It has a sustainable culture of product innovation allows it to generate hits. It's like a movie studio or a pharmaceutical company - it's a process of innovation - and innovation in terms of finding out what jobs there are to be done, not merely creating novelties, as is the common misconception.

Not only that, the company is still cheaper than the market, so there is a higher chance of P/E expansion than compression.

I don't think Apple will collapse immediately. I just do not see where their revenue growth will come from in the future while maintaining 30% margins. They have a great thing going with the iPhone where they can refresh the product a couple of times a year and have recurring revenue, but just like any piece of technology or fashion item that will wane someday. If everything goes stellar, the iPhone stays popular and they produce another hit product, what kind of growth do you expect? 15% revenue growth? In 5 years they will be as large as the entire energy sector. Its not sustainable. They can continue doing buybacks and maintain the status quo, but that returns about 7%/year.

I think if Apple Pay becomes very very popular and they can monetize it; Apple could be huge as they can enter the finance sector too. I just don't see a technology widget company as having an unlimited runway.

I choose to invest in companies I cannot shoot holes in as easily. I like to find small and midcap companies with an addressable market many multiples of their revenue and that have competitive advantages. Different strokes...

James

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Re: Buy Apple now?
« Reply #28 on: January 07, 2015, 09:17:22 AM »
I don't think Apple will collapse immediately. I just do not see where their revenue growth will come from in the future while maintaining 30% margins. They have a great thing going with the iPhone where they can refresh the product a couple of times a year and have recurring revenue, but just like any piece of technology or fashion item that will wane someday. If everything goes stellar, the iPhone stays popular and they produce another hit product, what kind of growth do you expect? 15% revenue growth? In 5 years they will be as large as the entire energy sector. Its not sustainable. They can continue doing buybacks and maintain the status quo, but that returns about 7%/year.

I think if Apple Pay becomes very very popular and they can monetize it; Apple could be huge as they can enter the finance sector too. I just don't see a technology widget company as having an unlimited runway.

I choose to invest in companies I cannot shoot holes in as easily. I like to find small and midcap companies with an addressable market many multiples of their revenue and that have competitive advantages. Different strokes...


In defense of Apple, they are coming out with wearables and as you said, they have a completely new revenue stream in Apple Pay. A year ago no one knew about those, and a year from now there could be two more ideas like that. Not saying there will be, just saying there could be. And who knows if any of those ideas will generate the income of iphone/ipads, but it is possible they could have an innovation that beats all previous incomes generated by iphones/ipads/etc. Shooting holes is easy, people have been shooting holes in Apple for years, but Apple keeps proving them wrong. Who knows where they go in the future.


This is coming from a guy who doesn't own any individual stocks, and I do see the logic of everything you said. My reason not to buy Apple would simply stop at the fact that it is too popular. Your logic makes sense, but so does many other ideas. At the end of the day we just don't know if they can continue revenue growth, and I am very happy to own part of them through my index funds, I want a piece of the pie if they do continue to grow.