Apple’s Stock Market Scam | Hacker News Reader

Apple’s Stock Market Scam

newrepublic.com

13 pointsantman12 comments

The author of this paper clearly doesn't understand the economics of stock buybacks. They are simply a tax efficient means of returning cash to shareholders, something Apple definitely has needed to do for a while.

Not to mention they make 60+ billion a year after tax. So, they're valued at less than 20x earnings, which is actually low compared to the rest of the FAANGs

Why isn't their P/E higher? Are all the institutional investors maxed out on how much Apple they can buy?

With a $1T valuation and a shrinking stock market as a whole that's not an unreasonable explanation.

Because they don't have flying cars of course :-P

In all seriousness though, 20 is not a low P/E. It's just that AMZN's 170 P/E is very, very high. Facebook and Google are in their 20s I believe.

If AAPL were trading at 10x or 12x earnings, that would be low, but still not insanely low.

Google's P/E is in the 50s, just like Microsoft. Facebook is 28. Pretty much every successful tech stock is way more expensive than Apple.

> returning cash to shareholders

Just to emphasise this point more: to first order, a buyback of $n of stock reduces Apple's market cap by $n. Apple would have hit a trillion much sooner had it not bought back so much stock.

This article is hilariously off-base.

Until the stock price goes down the drain like it did with RIM. They could have just issued larger dividends and investors would have something to show for it.

While Apple was built around products and a certain philosophy by Jobs, it became a money machine with Cook.

In the old days, there were no dividends, no care about share price, only products, quality and dreams. Nowadays, so few products/updates/new (compared to size and money available for r&d), only problems, cash and investors.

Not terribly interesting from an Apple perspective but I did find this illuminating.

"But as enforcement loosened, notably under the Reagan administration, buybacks began to increase. Now, they are omnipresent. A Roosevelt Institute study released on Tuesday found that corporations spent 60 percent of their net profits on stock buybacks between 2015-2017."

Sixty percent of profits on AVERAGE from 2015-2017 (across all corporations? US?).

Compound this with statistics (same article) that see no long term stock benefit from these short-term injections and you have a broken system of incentives with a generation of executives playing games with bonuses. It reminds me of all these studies criticising code metrics like lines-of-code as producing nothing useful except extra verbose code.

Can you explain why a buyback of $X is worse than a dividend of $X? For the company or for the world. (Apart from being taxed slightly differently, maybe)

Is the way investing is supposed to work that investors give people money and they never give it back?

What I found interesting in Apple’s earnings is how little money they need to pour into R&D and operating expenses. This leaves a huge retained earnings which has resulted in them having so much cash left over. It’s super easy for Cooke to indulge himself and enter new markets, but he’s an operations guy and it’s nice to see he’s sticking to his core competency. I’d be a bit nervous to see another CEO come along and try to be the next Steve Jobs (with a high chance of failing at that) and burning through billions of dollars.

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