Some of you remember me. I was accused of a million and one things (being a basher, an AAPL lover, etc.) when I got out of this stock and started going into AAPL. Some of you perhaps read my post "The Level of Denial Here Is Beyond Belief". I'm not here to bash or gloat or anything like that (even though I could).
What I am here to do is give a fair and honest evaluation of how value investing works, warts and all. It's extremely difficult because it requires patience and a honest evaluation of a company's fundamentals. Unlike investing in junk stocks like NOK, hoping for a home run where the stock doubles or triples, value investing is different. Someone here asked yesterday which stock had a better chance to double, NOK or AAPL. I had to laugh when I saw that. That is clearly the mind of a speculator at work. The real question for a value investor is when all is taken into account (share buybacks, dividends revivested, capital appreciation, etc.) how much can I gain over a multi-year time horizon. Which do you think offers the better chance of that, NOK or AAPL?
Yesterday was clearly not a good day for AAPL and the company does face problems. But be honest with yourselves. AAPL is being punished for generating 10 billion dollars a quarter and it has a PE of 7 when the cash is taken into account. It generates a 2.5% dividend that could swell to 5% in a month or two. New products are on the way and there is a loyal customer base to build on. In short, even though I am currently taking a small 10% paper loss on my position, I can feel free to add to it and expect the dividend to provide income while I wait. Can a holder of NOK say the same thing as the stock free falls and the company bleeds cash?
Interested in seeing how the longs feel now that the truth is out. Nokia is a junk stock. Extremely high risk with low prospects of reward. Period. Point. Blank.
Good points. However the key to AAPL is the investor swap timeframe. transitioning from a growth investment profile to a value based one takes time. I don't think they are being punished for generating 10B in cas a quarter. They are getting punished because they are under attack in their most profitable segment which is causing growth investors to move on. The value focus is coming in but not quickly enough. The yield crowd sees potential but not enough history or yield to be comfortable.
I'm sorry you say you could gloat? Am I wrong or hasn't AAPL been getting creamed? If you were dumping NOK for AAPL you have been losing money big time. I actually do think that AAPL is getting more and more attractive at these prices. That said I will stay long NOK (I am still in the green on the stock by the way). At these prices and with their assets and cash position I really don't feel a ton of risk. Is it a guaranteed 10 bagger as some believe? No, but I still think the company has tons of growth potential.
That's cool, homey. You're being a lot more civil than others on this board. I have not been losing money big time. I've taken a ten percent loss and made a bit of it back on the dividend over two quarters. If I had stayed in Nokia I would be down 25% percent with nothing to show for it. I would reevaluate my logic there. Nokia has a ton of risk to head back down under $2. The company continues to bleed cash and dilute the float by taking on debt. Growth potential is nonexistent for a company selling a $20 phone worth less than Fisher-Price chatter phone.
P.S. NOK actually increased it's cash position on the quarter, average sale price of phones improved, Lumia sales increased, albeit not as much as most had hoped. Overall this quarter was not a disaster, it just wasn't great.
Groovenirvana2013, while your post makes sense if you're talking about value investing (which comprises part of my overall strategy), it really applies to those who are following this method investing. People like that probably should not be investing in NOK.
However there are also many other types of investors AND traders. Your post would apply only if value investing is what these people are trying to practise, and it is not. So I fail to understand what its purpose was, since people who already ARE value investors would be practising these recognized principles. The only trading I am against is HFT. I believe other types of investors, or traders, or speculators, or whatever they might be called, are entitled to their own choices.
I WILL say however as someone who is gradually lightening my positions premised on value investing, that value investing works only IF (not WHEN) the market recognizes it as such. That doesn't work so well in current distorted market situations artificially propped up by QE, misinformation, and I might even say, disinformation. It doesn't matter what our metrics are and what models we use if Mr Market doesn't agree. Hence my huge bleed also from AAPL, which I will average down purchase not when I calculate it's way below fair value (which it already was a while back) but when it's so below fair value that even Mr Market decides its time to buy in, and prices it such.
Extremely intelligent post! Real food for thought!
The purpose of my post was to simply respond to the critics who felt that a move into AAPL was foolish but staying with Nokia was a pot of gold at the end of the rainbow. Not sure how long you've been on here, but a lot of people have poured tons of money into NOk expecting it to go to $20 within a year. The level of fantasy on this board has been extreme, to say the least.
Yes, I do agree with your point on the limits of value investing. Still, it makes more sense than the madness some posters here have stated. For example, did you know that these people were lauding Elop as a hero for CUTTING the dividend? Yes. They actually thought cutting the dividend was a sign the company was heading for a brighter future. Absolute madness.
Again, I said "warts and all" when I referred to value investing. Things will be tough for AAPL but based on my entry point, dividends, and the company's cash position, it's still a better bet than Nokia for the long haul. That was my main point.
I don't think it is a junk stock. The reality of the NSN news today is hard to swallow. NOK will have to give that division away to get it off the books. I am not sure they can even give it away now. I think Nokia is fairly valued around $3. I called fair value of $3.40 on Nok over a year ago when it got beat down below $2. My only logic was that Nok had more cash on hand than what the stocks was trading for. That is no longer true as they have gone to the debt market twice since. If not for NSN, I do believe MSFT would have bought them. Oh well, would not touch NOK as a speculative play either now.
I, like you jumped into Appl a few months ago. Screaming value right now. I think what people miss is the fact that these things play out over a year or more not days and weeks. 9 month from now Apple will be sitting back in the mid 500's. A conservative estimate would be around $550. The industry is changing and innovation is harder to come by and will be for a few years (that is the cycle) but value is value and apple in comparison is undervalued compared to all it's peers, regardless of cash hoard.
Buying Appl now is easy money, like Nok was at $1.86 last year.
Finally, someone who wants to have an intelligent discussion.
I obviously agree with you on AAPL. And years ago I would have had a similar opinion of Nokia. People here refuse to see how much debt Nokia took on with NSN, Maps, and their R&D. At the same time the float blew up to 4 billion shares. Huge float with a company mired in debt and burning cash. I'm sorry but that does classify it as borderline junk stock if not junk stock.
AAPL is getting killed for generating billions. And the fact that the dividend exists and will continue to exist means that the stock can be held indefinitely and even added to over time. Adding to a Nokia position at this point is financial hara-kiri.
You are absolutely right. These things take years to play out. Which is why I got out of Nokia and into AAPL. Warts and all, value investing beat speculation over the long term, hands down.
"What I am here to do is give a fair and honest evaluation of how value investing works, warts and all."
No, I think you are hear because you have an over-inflated sense of self importance but lack venues in your offline life to get the recognition you deserve. Stop rubbing salt in people's wounds.
I got a lot of grief for moving on to AAPL. Everyone here told me Lumias would overtake AAPL and rival Samsung. People bashed me and insulted me. And all I did was be honest. Hell, I'm even being honest now and saying I'm taking a 10% loss on AAPL. I might even get burned next week when AAPL reports earnings.
The point is the distinction between value investing in an expensive company and gambling on a cheap junk stock in the hopes of capital appreication. We can all learn from this.
That is so wrong and typical of a junk stock investor. As AAPL generates a dividend, I'm collecting income as I wait for capital appreciation to return. The company is currently generating and has enough cash to exist for a long time to come. Nokia has a few billon left and is burning through that. BK is highly likely if things continue like this.
So share price is not all that matters. AAPL will stabilize eventually on valuation. What of Nokia? What can hold it up from trading at or under a dollar?
So go over to the AAPL board, they could need some pep up talk. BTW: what use is it if Apple generates tons of cash but only spends them for new headquarters and payroll expenses while shareholders only get change money?
Even if they sit on that cash forever, they are undervalued. The reality is that increased dividends over the long run have little effect on stock price. It is all about earnings and rev. Stock buyback is better and will serve everyone in the long run. Will Appl cave to pressure, "yes", but it does not matter. Nokia on the other hand has been screwing share holders by diluting shares for a year now. Wake up to that fact.
The money will be spent. You know that. It's simply a matter of time. Dividend will be increased in about a month. Stock buybacks will continue. The trick for AAPL will be how to take on debt domestically and pay it off with foreign funds so that it incurs no tax liabilty or has to repatriate those overseas funds.
I do spend time on the AAPL boards. Today I''m going to cheer everyone over there up by telling them to come visit this board to see how the other half lives. There. Are you satisfied?