tag:blogger.com,1999:blog-8152901575140311047.post8708812097787586799..comments2024-03-18T10:18:19.736-04:00Comments on Musings on Markets: Emotions, Intrinsic value and Dividend Clienteles: The Apple trade postscriptAswath Damodaranhttp://www.blogger.com/profile/12021594649672906878noreply@blogger.comBlogger17125tag:blogger.com,1999:blog-8152901575140311047.post-43600683677794742112012-12-29T00:44:25.248-05:002012-12-29T00:44:25.248-05:00Apple should pay a dividend.Apple should pay a dividend.QUALITY STOCKS UNDER FIVE DOLLARShttp://www.manta.com/c/mxcpkb3/the-manhattan-calumet-value-stock-hotlinenoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-68320458008765807222012-06-09T11:03:30.498-04:002012-06-09T11:03:30.498-04:00I feel you're over-analyzing their dividend po...I feel you're over-analyzing their dividend policy. Apple simply have too much cash which are yielding at 1%. It's better for them to return the cash to owners than to do something foolish with it. As for their day to day activities and growth, they still have too much cash to spend wisely and foolishly on research and development. But I argue maybe it would do their price momentum more good if they just hoarded more cash, say in 5 more years, with a 35% growth in cash, they could hoard up 500 billion dollars, which would make a 1 trillion dollar valuation much easier to grasp.Edhttps://www.blogger.com/profile/03900432013968866466noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-30065894535089169322012-05-11T16:10:28.890-04:002012-05-11T16:10:28.890-04:00Sir, I am your online student and a big fan of you...Sir, I am your online student and a big fan of yours!! <br /><br />The biggest takeaway for me from this article was to understand how dis-alignment of management and stockholders interests could actually disrupt value and it is not always the shareholders who are right. We have read about the Management paradox but sometimes shareholders could also have negative effect on company's valuation. After all, the PE firms create value by restructuring the organizations, debt financing and higher alignment between management interests and shareholders.Shivanihttps://www.blogger.com/profile/10362828960017258032noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-22352802846929788752012-04-24T17:28:29.816-04:002012-04-24T17:28:29.816-04:00I am sure you would have an opinion on this news
...I am sure you would have an opinion on this news<br /><br />http://blogs.wsj.com/marketbeat/2012/04/24/apple-earnings-thats-a-blowout/?mod=e2fbVigneshnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-10761488333870316452012-04-11T15:33:30.644-04:002012-04-11T15:33:30.644-04:00May I submit a request for a follow-up post to thi...May I submit a request for a follow-up post to this post that outlines your investment approach relative to selecting your one option play (last paragraph under #1). Competitive advantages like what? How do you define down on its luck (and price)? I enjoy your posts and appreciate you sharing all of this knowledge and always want to learn more. Thank you in advance for the consideration.<br /><br />PaulPaul Knoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-22969368341952100732012-04-09T16:57:26.539-04:002012-04-09T16:57:26.539-04:00A beautiful explanation on the possibility of mixe...A beautiful explanation on the possibility of mixed clientele affecting the growth potential negatively. The points your critics use to demerit your sell action might all have truth to it - but the bigger question that begs to be asked is "Is all of that enough to pull the stock price/valuation down or to saturate its growth?" - And my answer to that is a resounding no. As long as the cash continues to flow, with all the pressure the management faces, ways will be invented to keep every one happy. The battles between investor groups will assume relevance only when the stock price reaches the point of being over valued. And with its current levels of earnings, the stock price will always struggle to reach the constantly revised (upwardly) valuation. The way I see it, exercising the momentum play or joining the band wagon will be the wise move until clear evidence of over valuation surfaces!dineshhttps://www.blogger.com/profile/17421530714224849663noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-31082899411046335292012-04-09T16:54:31.788-04:002012-04-09T16:54:31.788-04:00Aswath,
It looks like treasury stock doesn't ...Aswath,<br /><br />It looks like treasury stock doesn't have voting rights: http://en.wikipedia.org/wiki/Treasury_stock#Limitations_of_treasury_stock. If this is true, this mitigates completely the agency problems you described.<br /><br />If this is correct, can you sympathize with my argument of using treasury stock as a temporary, high-yield (yet volatile), savings account?<br /><br />Forgive my ignorance if I'm missing the obvious.FrugalProfessorhttps://www.blogger.com/profile/06256777547769911816noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-55174728834469213862012-04-08T10:58:26.579-04:002012-04-08T10:58:26.579-04:00I think you made a good call. For starters, with s...I think you made a good call. For starters, with size the returns from the ability to innovate is lower. Secondly, I am surprised that they have been able to hold margin and the competition at bay for as long as they have. Ultimately, once the innovating is done, it becomes a commoditized business with tightening margins (MOT with Razr; Sony with Walkman). Their success is at least in part competitors failure. Zune was good, but it died; HPQ came up with a decent Ipad alternate, it died. Their has been an unwillingness to compete; which surprised me.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-73053414109587062462012-04-08T04:21:23.105-04:002012-04-08T04:21:23.105-04:00Awesome! Well Explained! I feel Apple has reached ...Awesome! Well Explained! I feel Apple has reached its peak and with SJ absence the command/passion to create and find new products that will revolutionize the market will be a big challenge...at best they will improve the existing product lines but the market for replacement is not as huge and big as for the new product which puts apple into maturing company classification....WE all know what happened to APPLE when SJ had left though i want to be proven wrong and see apple continue to grow and find products that will continue to delight us!!Immortalhttps://www.blogger.com/profile/02889853969712537454noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-73721496498186826812012-04-07T18:20:14.652-04:002012-04-07T18:20:14.652-04:00Hi Prof,
Great post as always. I'm also a lo...Hi Prof,<br /><br />Great post as always. I'm also a long time reader of your investment books and the blog.<br /><br />Like many of the people here, I am also a firm believer in intrinsic value investing. But I was surprised by the number of people who would use valuation model as the only Rule (i.e. buy when the equation shows Current Price < My Value Estimate), instead I would use it as one of my tools. If I am risking my own money, I would use it in conjunction with many other tools (i.e. some contrarian technical indicators, flow of funds, etc.) to increase my odds.<br /><br />The reasons you bought and sold Apple shares further reinforce my old belief of an old Chinese saying - "as long as you can get to the other side of the river, you are the god." As you pointed out in Investment Fables, luck overwhelms skill. Also, gut feeling counts. An analysis with more accurate assumptions doesn't guarantee a better return.<br /><br />In my opinion, your successful run with Apple isn't luck. It required LOTS of patience and a big stomach. Even if we assumed Apple was a successful company in 1997, how many of us would buy a stock at $4.5 and be able to hold it to $600+? I bet most of us would have sold it before it hit $20. Finally, it certainly requires more insights and experiences to pick up a good debris out of 10 debris. An average investor may probably pick up 20 debris that all worth nothing at the end.CRE Appraisernoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-10273216253149316542012-04-07T12:42:35.089-04:002012-04-07T12:42:35.089-04:00aswath,
thanks for addressing the "question...aswath, <br /><br />thanks for addressing the "question of whether or when i would return". the stock market is -as bogle has so often suggested- driven vastly by short term emotions.<br /><br />thanks also for recognizing that you were lucky with your investment: when you buy a stock you are speculating; many factors beyond your control -often quite lasting- drive a sock's price up or down.<br /><br />now, going back to sooner or later: think sooner is better. <br /><br />that is because besides its incredible growth story (and many other reasons lasting at least for the next 2 to 3 years in my opinion) apple is quite an anomaly:<br /><br /><br />money mangers are confused by it is it a growth or value story for example or is it too good to be true story??) and are also afraid to buy it: how can it continue to grow?<br /><br />one think for sure: there is no other company that you can feel, connect with and assess the value of its products and utilities (think that is under appreciated and has room to grow) as an apple product.<br /><br />keynes was well known in investing in just a few companies he perfectly understood how their products and services he could value: think apple would be his largest holding. <br /><br />would appreciate your take on the above.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-49471111274460343152012-04-07T09:57:55.732-04:002012-04-07T09:57:55.732-04:00Especially like your comments on Apple becoming a ...Especially like your comments on Apple becoming a transitional company. I find this phenomenon to be ultimately inescapable by very large successful companies at some point in their maturation. These transitions are often painful, punishing experiences for investors.<br /><br />Your explanations are very insightful but you could also have very simply said based on your calculation on Apple's value (I get something more like $680) there are other more undervalued investments available in the market and hence better places to place your investments than somewhere with only 11% discount to intrinsic value and 2% dividend. If you subtract out Apples cash hoard which likely cannot appreciate at the same rate as the business can then your absolute value of the discount is even less than what it appears. You could hang around for a few years trying to reap this last 11% but for a fundamental value investor better to move to more fertile fields.The Contrarian Individual Investorhttps://www.blogger.com/profile/10812447117232102268noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-30497440920790276032012-04-07T05:30:05.305-04:002012-04-07T05:30:05.305-04:00Aswath,
I'd be very interested in why you pu...Aswath,<br /> I'd be very interested in why you purchased Microsoft. I know this has been covered widely in Barron's/WSJ, but want to know if you have any unique insight not covered elsewhere.<br /><br />JatinJatin Shahnoreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-55854135311788738952012-04-07T03:02:20.550-04:002012-04-07T03:02:20.550-04:00I have Read You have bought Microsoft . Can You ex...I have Read You have bought Microsoft . Can You explain the reasons tras justify your decision?<br /><br />I live in Spain and I am very glad to find your blog because It is very useful and didactic.<br /><br />Thanks.Jose Miguelhttps://www.blogger.com/profile/08265709559685857545noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-41179732096116971712012-04-06T22:45:50.776-04:002012-04-06T22:45:50.776-04:00Thanks for the thoughts on repurchases vs dividend...Thanks for the thoughts on repurchases vs dividends...I found and read your series of posts on the subject. I'll have to continue to go through the archives to find other gems that were published before I learned about the blog.<br /><br />I was unaware that managers controlled repurchased shares...I thought the control rights were relinquished when it was in treasury stock, so I could definitely see how that would create agency problems.<br /><br />Thanks for the great blog and insightful thoughts!FrugalProfessorhttps://www.blogger.com/profile/06256777547769911816noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-51196493318966267292012-04-06T22:14:11.752-04:002012-04-06T22:14:11.752-04:00Brian,
i did a post on buybacks versus dividends, ...Brian,<br />i did a post on buybacks versus dividends, with and without the tax issue. It is not that all stockholders like dividends, it it that some them do. As for buying back stock and holding it as treasury story, you cannot do that for the long term in the United States, because it skews corporate governance. The managers control the bought back shares and can use it to further their own interests.Aswath Damodaranhttps://www.blogger.com/profile/12021594649672906878noreply@blogger.comtag:blogger.com,1999:blog-8152901575140311047.post-22712942334387703392012-04-06T21:59:19.287-04:002012-04-06T21:59:19.287-04:00Great response. It shows you are a mere mortal li...Great response. It shows you are a mere mortal like the rest of us.<br /><br />Would you mind commenting on the tax implications of your trade and the fortuitous timing given the changing of the tax code? Am I the only person in the world that thinks about taxes? The capital gains tax is going up 10 percentage points, per Donald Marron, or 66 percent from 15 to 25 percent (for high-income tax payers). Sellers who postpone realizing capital gains 1 day from Dec 31, 2012 to Jan 1, 2013 will pay 66% more in capital gains taxes. I find this to be fascinating. Interestingly, deferring the realization of a capital loss from Dec 31, 2012 to Jan 1, 2013 would increase the tax credit by 66%.<br /><br />One of these days I'd love to hear your explanation of why investors prefer dividends to share repurchases? I understand that historically dividends have been viewed as "sticky", with share repurchases viewed as sporadic and temporary, but there is nothing intrinsic about a cash dividend distribution over a share repurchase that should make it any more sticky (again, other than decades of tradition which say otherwise). I also understand that some investors like a dividend because it saves them the hassle of selling, but I view this as a huge externality to impose on all other investors, many of which wish to buy and hold.<br /><br />I'd also like to hear your thoughts on the reselling of repurchased shares. Why don't firms use treasury stock as a high yield savings account, yielding the cost of equity? Seems to me a much better place to temporarily stash unneeded cash, and could have served Apple well over the past few years. I suppose lack of diversification is a valid reason not to do this, just as it wouldn't be prudent of an individual to hold a disproportionate amount of her wealth in a single stock.FrugalProfessorhttps://www.blogger.com/profile/06256777547769911816noreply@blogger.com