

Apple's Cash to Exceed $300 billion by 2015 - lotusleaf1987
http://bullcross.blogspot.com/2011/05/apple-is-sitting-at-equivalent-of-78.html

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ghshephard
There are very, very, skilled investors, hedge-fund owners, traders, and
speculators that are intimately familiar with every nook, and cranny of
Apple's Cash Flow, Income and Balance Sheets.

Now - You can trade against these people based on your intimate industry
knowledge of trends regarding IOS, Apple's new markets, Apple's unique
position in terms of mind-share, Microsoft's Weakness, or Google's potential
problems with market fragmentation on the Droid platform - these are all
skills/knowledge that may give you a unique advantage.

But trust me when I say people (much) smarter than you with regards to all
matters financial have declined to bid-up Apple, despite it apparently having
a tsunami of cash about to come its way.

Once again - I'm not saying don't invest in Apple, I'm saying don't invest in
Apple because you think you've identified some financial aspect that has
somehow escaped the eyeballs of the ten-thousand odd people who make a living
crunching these numbers every day and can afford to speculate and otherwise
arbitrage these (seeming) value opportunities across hundreds, if not
thousands of company's that are in this (or simliar) positions.

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jacques_chester
I doubt there are ten thousand Apple anaylsts. Maybe ... ten.

And they'll know each other. They'll read each other's papers, pressers and
blogs. They'll be in the same analyst's tours and on the same conference
calls. They attend the same parties, have friends in common and possibly went
to Wharton, Harvard, Stanford for Yale together.

In short: they could easily be suffering from groupthink.

~~~
ghshephard
Oh, don't get me wrong - betting against the Apple _analysts_ makes absolute
sense - In particular, for anybody on HN, I'd trust your insight as much, if
not significantly more than the Apple "Analysts" - Very few people have
Gruber's track record in terms of understanding where Apple is going to go,
and even he has been off a few times (misjudged how successful the iPad was
going to be).

I'm not talking about Apple Analysts, I'm talking about _financial_ analysts,
who all see Apple's balance sheet, cash flow - and can make the same Analysis
that the OP did, which is "Apple will have $300 Billion in Cash by 2015."

That's a decision to invest for financial reasons, nothing inherent in Apple
itself. If those investors have declined to invest in Apple, it's because they
have greater knowledge, understanding, and ability to comprehend what is
likely to happen to the cash flows that Apple is experiencing right now than
we do.

So, if you want to invest in Apple the "Company" because you think you
understand it's future as a "Company" - great, I think you have a chance to
out-perform the market.

But, if you want to invest in Apple the "Financial Statistic" because you
think you understand how to value it's future based on NPV of future cash
flows - realize the people you are going up against have been doing that type
of analysis on companies for 8-10 hours a day for the last 20 years, and have
declined to bid up Apple.

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jacques_chester
I misread you, then.

Investing based on ratios, like any other approach, has its pros and cons. The
pro is that it is largely immune to subjectivity (assuming proper
bookkeeping...); the con is that cross-company comparisons can be difficult
because different industries can have radically different typical ratios.

I think that ratio analysis can serve two useful purposes:

* Detecting funny buggers. One or more ratios will often becomes skewed out of band when somebody is being creative with bookkeeping. * Reality checking. This is a more general case of detecting funny buggers.

Finally, active share traders won't calculate purely on NPV, cash per share,
etc. They'll be looking at share price growth and other shares may seem more
attractive, for various reasons good or bad, regardless of the fundamentals.

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theprodigy
I doubt Apple will want cash reserves that high. Investors criticize companies
that have too much cash and just sit on it, ie microsoft and now apple.

The reason is the company should be using some of that cash to invest in
growth opportunities or their future, either acquisitions, R&D or new
projects. If they don't do anything with the cash and just sits on it, this
action is a signaling mechanism that essentially says that Apple doesn't see
any growth opportunity worth investing in. Traders will sell the stock because
there is no recognizble opportunity to grow revenue and they are not investing
in their future so they can be vulnerable to competition in the future.

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qq66
Of course, this 0.00% assumed growth rate omits the obvious, which is that a
company as successful as Apple has a lot of competition brewing in each of its
markets, and a negative growth rate is certainly possible.

Technology is an industry where you run to stay still. Apple's cash flows are
far less predictable than, say, Procter and Gamble's. What's Apple has done in
the last ten years could continue for another ten, or reverse entirely.

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rphlx
It's nearing a year old but here are some points to consider if you're an
apple long: <http://aaplbear.com/>

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jacques_chester
I can see at least 4 reasons why Apple isn't paying dividends.

1\. Tax: the cost of repatriating foreign profits to the US is high. The USA
has a higher corporate tax rate than most countries, and with switcheroos like
the "Dutch Sandwich" and the "Double Irish", bringing that money home makes no
sense.

2\. Tax again: capital gains vs income tax, to be precise. Many shareholders
would prefer the stock price to go up over receiving dividends. A growing cash
balance puts upward pressure on the stock price.

3\. Buy-up fuel. Like large most tech firms, Apple has a split personality.
Part creator, part hedge fund.

4\. For dick-waving rights. Never underestimate this motivation. Here in
Australia the dick-waving contest between the executives of the two largest
mining companies has led to outbreaks of profoundly expensive bugger-ups.

~~~
hugh3
_4\. For dick-waving rights. Never underestimate this motivation_

Related: Steve Jobs has already publicly committed himself to not paying any
dividends. It's difficult to go back on something like that even if it does
make sense.

It's hard to know what Apple could do with a cash pile of $100B, $200B, $300B,
because nobody has ever had a cash pile of $100B, $200B, $300B. As a
shareholder I'd rather sit around and find out what they can do with the money
rather than collect my $2.50 a share or whatever.

~~~
jacques_chester
I imagine that once Apple's sales growth slows, shareholders will want
buybacks to support the price. That's what happened to Microsoft. What Steve
Jobs wants is one thing, what the shareholders can do if they get hungry is
another thing entirely.

