Apple's Cash to Exceed $300 billion by 2015 | Hacker News Reader

Apple's Cash to Exceed $300 billion by 2015

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16 pointslotusleaf198711 comments

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.

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.

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.

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.

The problem is the very, very skilled hedge fund and institutional investors that are capable of moving a stock to stratospheric heights are judged on their performance on a month-to-month basis. The price action and patterns and trading Gods have lead them to believe that in the short-term AAPL is not going to go up very quickly (until it does, more on that later.)

Apple has essentially been going sideways for the last 6-7 months. While this makes Apple a bad trade, it doesn't mean Apple is bad investment. Zaky is saying that in 3 years Apple will be worth significantly more and thats hard to argue with. Those that have argued seemed to be completely out of touch with the company and focused on silly things like "Apple is not spending money on R&D because R&D expense dropping if taken as a percentage of revenue."

Speculators and traders aim to buy high and sell higher. Lots of money is sitting on the sidelines waiting for Apple to reach a new all-time high on above average volume before they pounce. Apple hasn't made a new high since February. I suspect these "very, very skilled" traders and speculators will jump back on board if and when Apple blows past $365.

If AAPL goes sideways for months at a time for months at a time, as it is apt to do, then these "skilled" pros take their money and put it in more exciting places until the stock comes back to life again.

Note that this "buy high/sell higher" is the exact opposite approach of long-term-minded Graham/Buffett value investors. While the stock is going through these periods of consolidation, it makes for a perfect time for long-term, individual investors to buy a piece of a great company at a ridiculously cheap price and not have to think about their money more than a few times a year for a very long time.

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.

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.

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

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.

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.

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.

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