I just watched a video on Apple’s “cash problem”, with one of the video creators core point that “people expect the stock price to go up, and that can’t happen unless Apple does something with that cash and makes more with it!”.
Got me thinking: isn’t one of the core premises of investing that you’re purchasing ownership of cash flow? Is the ideal company one that it’s never profitable because it so perfectly allocated its money to never return a dime, but always to reinvest in itself? There’s a time and a place for re investment, but returning profit to investors is marginalized these days.
Apple probably doesn’t have a money problem, the culture does. Startups don’t sell growth except secondarily, they sell profit.
AAPL pays a dividend and has a substantial buyback program. Their cash problem, if you want to call it that, is that they bring in so much revenue with nice margins that it is impossible to allocate it all. So they return some value back to shareholders through divvies and buybacks, spend what is reasonable on R&D, and keep cash on hand for flexibility. They don't seem that big on M&A, but that is probably a good thing (looking at Cisco for example)
It's a shame that the third way to spend the money is totally forgotten now apparently. Yes you can re-invest, give back to shareholders, but why not increase wages?
Got me thinking: isn’t one of the core premises of investing that you’re purchasing ownership of cash flow? Is the ideal company one that it’s never profitable because it so perfectly allocated its money to never return a dime, but always to reinvest in itself? There’s a time and a place for re investment, but returning profit to investors is marginalized these days.
Apple probably doesn’t have a money problem, the culture does. Startups don’t sell growth except secondarily, they sell profit.