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.
What he described makes it both long term and short term a bad investment. But he seems uneasy what “buying at peak” is.
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.
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.
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.
Which hey, maybe. But that is exceptionally rare in practice.
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.
- historical long-term PE ratio is 15
- lets bump it to 20
- lets bump it again to 25
- Apple is at 33
- 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"
On the other hand few companies could have achieved such growth and it seems better to go with winners.
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"
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.
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