What you said (if true) makes Apple a great business. And your reasonable arguments make a good case for that.
But does it make a good investment? A good investment is investing in a great business at a reasonable price. If the price is unreasonably high, then even a great business makes for a bad investment.
The thing about Berkshire is that they're so big that they can either buy pieces of huge companies like Apple, all of which have high valuations, or they can sit on the cash. Nothing else moves the needle for them - an amazing multi-million dollar business would be 0.0.. % of their portfolio.
> But does it make a good investment? A good investment is investing in a great business at a reasonable price. If the price is unreasonably high, then even a great business makes for a bad investment.
This depends on whether you are thinking short-term or long-term. Short-term, I don't know because at this point I'm exclusively a long-term investor (something I might should have mentioned in my original comment).
The current price (for a company as big and mature as Apple) is essentially a gauge of how bullish vs bearish big investors are feeling about the sector and the specific company. It may fluctuate up and down a little bit based on news and such, but long-term I expect it to do well.
- either it grows gross profits (33/25) 32%, or its worth 32% less than it is now.
- revenue has been flat since late 2021
- gross profits have been flat since late 2021 and approximate ceiling of 27% achieved in 2012
- if we skip just one unprincipled bump, we're looking at 65% increase required in gross profits.
- "long term investor" is handwaving, not a virtue, thesis, or principle. it doesn't mean anything here other than "I strongly believe Apple can double sales while maintaining or growing profit margin" or "can the timeline be longer please? because on a long enough timeline I'll be right"
It absolutely is a gamble if Apple could grow again like it did when it grew from 55-60bn USD in 2018-2020 to a company earning 90-95bn USD in 2021 to 2023.
On the other hand few companies could have achieved such growth and it seems better to go with winners.
I understand this is an "intro-to-equities" case but doesn't this completely ignore dividends and buybacks?
I'm not an expert at reading financial statements but it seems to me Apple could easily double their dividends and still be very profitable relative to other companies.
Surely moves like that should have some effect on stock price meaning there are more possibilities than "grow gross profits" or "worth less"
No. PE (price to earnings ratio) is the ratio of price to profit. Assuming they do not grow, their profit is stable at the latest reported value indefinitely, and that their accounted profit is a good approximation of distributable cash (that is the approximate goal of how profit is to be accounted), then the inverse of the PE is the maximum return on investment at this instant. That is all of their earnings paid out as returns.
Apple has a PE of ~34, so that is ~3%. 30 year treasury bonds are averaging ~4% right now. So yeah, Apple would be a abysmal long term investment if you assume they do not continue to grow. Anything with a PE over 25 at this time must grow to be worth the investment.
This is a good Q, I didn't know the view in the other reply, at least specifically. In general I know profit : stock price is necessary for calculating rate of return.
my dumber answer is "only if dividends and buybacks exceed profit sustainably", which is an oxymoron eschewing extreme circumstances (taking on debt at that you won't pay back, or being offered debt at 0% interest despite the fact you're giving it away)
There's lots from there (ex. couldn't we pull that off? Bank doesn't know we're liquidating if we don't tell them) -- in general the abstraction finance uses is "is the rate of return higher than bonds?", which of course is true in the short run in this extreme of a scenario, but unlikely in the long run
Investment is about growth; Apple is already huge. When you've already cornered your respective market niches and you have big competitors it's hard to grow more. That said I think there are less reliable investments, so Apple's probably fine.
Investment is actually about returns. Growth is a means of getting returns, but not the only way. A large, stable, profitable company with no growth prospects is not a poor investment if they pay out returns.
Indeed. As profitable companies get big and struggle more with growth, they can do stock buybacks, or pay out dividends. Plenty of stocks have held strong with small growth % but non-trivial dividends. I agree, when talking about companies this size, it isn't all about growth.
Presumably Apple has enough cash on hand so that it could "pay back" its current shareholders by big (relatively speaking) dividends and even stock buy-backs, but not sure how much that influences the buy/sell decisions of retail/small stock-exchange investors.
Sure it does. It doesn't mean it's impossible for long-term to be overpriced, but it is definitely a lot less likely to be significant/impactful, and if it is overpriced and experiences a correction, you're much more likely to be able to ride it out and average into a reasonable position over time. With long term you're looking for several % growth per year, over multiple years. With long term you're much less sensitive to overpricing. Short term on the other hand carries significant risk of overpricing, because you're concerned about tiny % changes over short periods of time. With volatility/risk, the length makes a big difference.
What you are writing is valid for investing in broad market index funds, but not for investing in individual businesses.
Warren Buffet's goals are not the same as those of someone who wants to maximize long term returns while also minimizing time and effort spent evaluating investment options.
Not really. It may look that way if all you see is historical averages (and you dollar cost average) but there are definitely times when buying will screw you indefinitely compared to not.
Valuation absolutely matters, and buying when something is overvalued can irrevocably screw you over.
And that is on a broad market basis - individual companies can just flat out go bankrupt and cease to exist.
If you bought in ‘72 or ‘99 for instance, it was a very, very long time before you’d even be able to cash out neutral.
> If you bought in ‘72 or ‘99 for instance, it was a very, very long time before you’d even be able to cash out neutral.
Agreed, but I would consider those different companies (particularly in '72).
When dealing with a small or medium company, the approach is very different and I would very much agree regarding risk of overpriced. However at this point Apple is very blue chip and very different than their startup or almost bankrupt earlier versions of themselves. If Apple were a startup or side-company in the tech industry, I'd have a very different opinion regarding whether they are over-priced or not, and how much risk that would carry.
That's quite an extreme strawman. I never said that, and I doubt anybody reasonable would agree with that statement.
If it makes you feel better to assume anyone with a different opinion than you must be an unreasonable and uninformed idiot, then by all means go ahead thinking that, but I have little interest in engaging in a bad faith conversation.
I wouldn’t say that AMD is “doing better” than Nvidia in the gaming market but as another commenter said, their success is probably mostly due to an excellent price/performance ratio compared to NVidia.
Intel is also somewhat making ground with their Arc GPUs.
The key to doing well in the gaming market are good prices, and good gaming performance with DirectX and Vulkan.
No, just as a consumer, but developers are building products for sale, which means they need to target something near the lowest common denominator, which should lead them to a similar conclusion.
I don't like that there is an income level cutoff. Hear me out... a single person with an income of $299k living in Nebraska has way more expendable income than a single income family with 4 kids with an income of $299k living in the bay area.
> how would you determine what a person should receive?
If it's truly an incentive, incentivize everyone. I know people who make $1 million/year who will argue over $10. $7500 would absolutely affect their behavior even though they can afford an EV without it.
