Deleted
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Post by Deleted on Sept 22, 2012 22:51:34 GMT -8
I've never heard anyone who thinks splits do nothing be able to answer this question: Without the last two splits, would Apple currently be trading at $2800? Of course not. I can answer that question. It's simple really. Berkshire Hathaway BRK.A Shares 1.66 Million PE 19.3 EPS $7,073 PPS $134,584AAPL with two 2:1 reverse splits Shares 118.38 Million PE 16.5 EPS $340 PPS $5,600Would AAPL be trading at $2,800? No, it would not. AAPL would be trading at $5,600 because the majority of traders (70% in AAPL's case) trade using valuation metrics based on future ROI, not an arbitrary perception that the price is too high/low. The institutions that trade AAPL don't do so because they can get MORE shares per million invested. They do so because they believe the million invested will become $1.30 million in a years time (or less). Things that cost more than $700. A large screen TV A jet ski (without trailer) A Harley Davidson motorcycle (or a crotch rocket) A two week vacation to a National Park A year smoking habit A weekend in Las Vegas 249 day supply of Lattes Four nights at a major league ballgame with the family Two medium sized multi-color tattoos A set of custom 18 inch wheels for the car A 2000 Watt stereo system for the car Two six packs of beer for a year etc, etc, etc. If someone says they can't afford AAPL at $700, they just don't want it bad enough to forego something else. edited to correct spelling
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bud777
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Post by bud777 on Sept 22, 2012 23:01:24 GMT -8
Hmmm, JD and mbeauch, now you got me thinking...I wonder if there really IS a link between the P/E investors will accept and the stock price. Emotionally, someone might feel that a $60 dollar stock had more room to grow than a $600 stock, regardless of the fundamentals. We should be able to test this but how?
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Post by mbeauch on Sept 23, 2012 5:13:17 GMT -8
I can answer that question. It's simple really. Berkshire Hathaway BRK.A Shares 1.66 Million PE 19.3 EPS $7,073 PPS $134,584AAPL with two 2:1 reverse splits Shares 118.38 Million PE 16.5 EPS $340 PPS $5,600Would AAPL be trading at $2,800? No, it would not. AAPL would be trading at $5,600 because the majority of traders (70% in AAPL's case) trade using valuation metrics based on future ROI, not an arbitrary perception that the price is too high/low. The institutions that trade AAPL don't do so because they can get MORE shares per million invested. edited to correct spelling Should have been corrected for math. JD said 2 splits and Greg said 2 splits. Lets look at the math. 937.41/2 = 468.70 shares 1st reverse split. 468.70/2 = 234.35 shares 2nd reverse split. 234.35/3 = 117.17 shares 3rd reverse split. Be careful when you get on the high horse. When posting incorrect information it becomes highlighted.
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Post by rickag on Sept 23, 2012 6:23:48 GMT -8
I believe there has been 3 splits. 700 x 2 = 1400 1400 x 2 = 2800 2800 x 2 = 5600
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platon
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"All we can know is that we know nothing. And that's the height of human wisdom.? Tolstoy
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Post by platon on Sept 23, 2012 8:17:27 GMT -8
I can answer that question. It's simple really. Berkshire Hathaway BRK.A Shares 1.66 Million PE 19.3 EPS $7,073 PPS $134,584AAPL with two 2:1 reverse splits Shares 118.38 Million PE 16.5 EPS $340 PPS $5,600Would AAPL be trading at $2,800? No, it would not. AAPL would be trading at $5,600 because the majority of traders (70% in AAPL's case) trade using valuation metrics based on future ROI, not an arbitrary perception that the price is too high/low. The institutions that trade AAPL don't do so because they can get MORE shares per million invested. They do so because they believe the million invested will become $1.30 million in a years time (or less). Things that cost more than $700. A large screen TV A jet ski (without trailer) A Harley Davidson motorcycle (or a crotch rocket) A two week vacation to a National Park A year smoking habit A weekend in Las Vegas 249 day supply of Lattes Four nights at a major league ballgame with the family Two medium sized multi-color tattoos A set of custom 18 inch wheels for the car A 2000 Watt stereo system for the car Two six packs of beer for a year etc, etc, etc. If someone says they can't afford AAPL at $700, they just don't want it bad enough to forego something else. edited to correct spelling I see both sides of this debate and I think both sides are right but I have never rode a fence in my life so I will chime in. Over the past 40 years I have owned many stocks that have split and I have never lost money on them after the split. However I have seen some that have slowed their growth rate for various reasons after a split. That said retail investors such as myself have a hard time being rational about investing. For instance we may balk at paying $700 for a share of Apple but after a 10 for 1 we may balk at owning 20K shares of Apple even though nothing has changed other than our perception of the situation. That said I hope for a stock split because I think it would benefit me faster than the opposite and I am getting ready to trim my stock holdings dramatically. All of that said does anyone know what kind of beer Gregg drinks? If he can only afford 2 six packs a year it must really be good.
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JDSoCal
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Aspiring oligarch
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Post by JDSoCal on Sept 23, 2012 9:37:52 GMT -8
I can answer that question. It's simple really. Berkshire Hathaway BRK.A Shares 1.66 Million PE 19.3 EPS $7,073 PPS $134,584AAPL with two 2:1 reverse splits Shares 118.38 Million PE 16.5 EPS $340 PPS $5,600Would AAPL be trading at $2,800? No, it would not. AAPL would be trading at $5,600 because the majority of traders (70% in AAPL's case) trade using valuation metrics based on future ROI, not an arbitrary perception that the price is too high/low. The institutions that trade AAPL don't do so because they can get MORE shares per million invested. They do so because they believe the million invested will become $1.30 million in a years time (or less). Things that cost more than $700. A large screen TV A jet ski (without trailer) A Harley Davidson motorcycle (or a crotch rocket) A two week vacation to a National Park A year smoking habit A weekend in Las Vegas 249 day supply of Lattes Four nights at a major league ballgame with the family Two medium sized multi-color tattoos A set of custom 18 inch wheels for the car A 2000 Watt stereo system for the car Two six packs of beer for a year etc, etc, etc. If someone says they can't afford AAPL at $700, they just don't want it bad enough to forego something else. edited to correct spelling I'm not sure what point this is supposed to magically prove. BRK-A is an investment fund, an aggregate of 25 stocks. So its price is not analogous to a single company's valuation any more than the DJIA is. Show me an actual STOCK that has traded anywhere near $5600. But since you brought it up, Buffett has said he likes a large price on BRK specifically because it is so expensive people will buy and hold it instead of day trading it. So no liquidity, by design. Is that what AAPL investors would want? Nobody trading it? And I should point out that Berkshire Hathaway's board finally yielded to investor pressure recently created the B-class shares, to make investing in BH more affordable and liquid; currently BRK-B is trading ~$89. So your one example actually works against you, since even BH's board saw the light. I would think it a self-evident truth that people already think AAPL is "expensive" if you watch 5 minutes of any discussion of it on the financial media (and I include fund managers - why do you always assume I am talking about the retail investor?). And the perception of "expensive" is not necessarily synonymous with "affordable," so I'm not sure why you listed all of those consumer products. The price of a big screen has gone down, not up. Would big screens be selling if they had gone up in price 70%? or iPhones for that matter? Not analogous. Gregg, some of the strawman shit you write is so ludicrous, one has to believe it is included to provoke. I never suggested that a high stock price is the only metric traders use. Jesus H man. But the idea that AAPL has any connection to P/Es is laughable. Then again, some people here still scoff at the idea of option pain. "Some men you just can't reach." I mean seriously, anyone thinks that Apple without splits would be trading anywhere near $5600 right now should placed into conservatorship for his own protection. It's so laughable it isn't even worth further discussion.
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bud777
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Post by bud777 on Sept 23, 2012 11:30:11 GMT -8
JD, I am having trouble deciding how you really feel about splits. Are your posts sarcastic? Sometimes you say, "Would people really buy Apple at $5600 a share" which implies that the splits are a good thing. Then other times you seems to be saying that only the unsophisticated buyer would care about having 10 times the number of shares at .1 the price. I am pretty sure I agree with you, but I am not sure which opinion I am agreeing with.
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Post by stkstalker on Sept 23, 2012 12:18:34 GMT -8
JD seems crystal clear to me - pro-split with one reason being the price is keeping mathematically challenged individuals out of the stock. There really is a perception out there on the part of people who really should know better (like anyone who shows up on CNBC) that APPL is 'expensive' and nothing except a split or an insane pullback is goofing to change their minds.
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JDSoCal
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Aspiring oligarch
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Post by JDSoCal on Sept 23, 2012 12:25:24 GMT -8
JD, I am having trouble deciding how you really feel about splits. Are your posts sarcastic? Sometimes you say, "Would people really buy Apple at $5600 a share" which implies that the splits are a good thing. Then other times you seems to be saying that only the unsophisticated buyer would care about having 10 times the number of shares at .1 the price. I am pretty sure I agree with you, but I am not sure which opinion I am agreeing with. LOL. I am saying that the average AAPL buyer (or seller) is not an AFB 2 member. He is ill-informed and irrational, even if he tries not to be, because looking for rational patterns in an irrational system is itself irrational. I am saying that the AAPL buyer/seller, institutional, fundie, or retail, is someone who takes into consideration - among many other things - that AAPL is either expensive or perceived that way by others, or has risen too quickly, or can't keep on growing because of some law of large numbers posited by a mathematician before modern corporations even existed. It's all bullshit, but you have to take it into account, because there are only 125 or so informed AFB members (plus Gregg and Adam ), vs all the dumb bunnies out there who think any stock over $100 is expensive. In sum, yes, IMO, a high absolute stock price is bad (unless you are a weekly options gambler, in which case, you are part of the pain problem, and I am not concerned about your needs), and we would never in hell be trading at $5600 right now. I won't bother creating a poll to see that 95% of rational humans believe this to be true. BTW, funny how few people have noticed that S has moved to a "PARABOLIC!" $5.65 the past few months. I wish I'd bought those S options last spring like I had mentioned.
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bud777
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Post by bud777 on Sept 23, 2012 15:59:08 GMT -8
I think I have found a new perspective on why people might believe that a stock is cheaper after a split. Like many great insights, this epiphany came from the least likely source I could imagine...an in-flight merchandise catalog.
Rather than having you just go out and run, this magazine offered an elliptical trainer so you can run in place. But not just any elliptical trainer...this one was mounted on a wheeled platform so when you ran, it powered the wheels so you move like if you were running, but you are not because....And then, and then for $200 more, you can buy a stand to put the wheels on so you are running in place on the wheeled platform driven by you running in place on the elliptical trainer. I am not making this up. I bet we could start a discussion on whether stock should be split vertically or horizontally. I believe a wise man here said something about trying to be rational in an irrational world. I will stop now.
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Mav
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Post by Mav on Sept 23, 2012 16:11:52 GMT -8
This is the only time I can remember that Apple addressed the stock split question. From March 19, 2012 cash balance conference: events.apple.com.edgesuite.net/123pijhbsdfvohbafv19/event/index.htmlIn response to Munster's question (about 14:30 in) (Note for "historical" reference: AAPL was trading around 600 at the time of the conference, and in the 540s at the beginning of March.) IMHO, a stock split is a question of when. You only have to go as far back as Apple's "struggling" over whether to give a dividend for clues and comparing statements.
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Post by mbeauch on Sept 23, 2012 18:14:49 GMT -8
Brilliant Mav, that sure sounds a lot different than TC saying they are meaningless. There was front running during the first part of the year for the dividend and stock purchase program. Granted, Q1 earnings were spectacular, but did not justify the move to an +18 p/e when AAPL had been under so much pressure during 2011. I remember having these discussions years ago at the other place. I have always wanted a buyback to cover quarterly share dilution, a dividend and a stock split. I remember being ridiculed over there for having that opinion, yet here we are 2 of 3, and 3 is coming. I will ship Tabasco sauce to all the crow eaters. As I have maintained, the people against it are only thinking about options and how it would affect that market. Why fight something so vehemently if it would not matter. FTR, yes I hold many options, but would love to see all options and futures markets dismantled. It is gambling plain and simple and puts all of our financial lives in jeopardy. There are many that think 2008 happened because of capitalism, it happened because of leverage and how easily it is manipulated. Stocks are moved nowadays to influence the options, fundamentals be damned. I also think every corporation should strive to buy back all of its shares and turn private. The IPO is suppose to be a tool to finance expansion, not a roulette wheel. This rant is just my opinion, not trying to influence, sway or antagonize. It is what it is. Don't like it, tough. ;D
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Mav
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Post by Mav on Sept 23, 2012 18:35:10 GMT -8
That and you joined 'em. (/half a catchphrase) Leverage: As with credit cards, car loans, student loans, mortgages, etc., use with care and caution.
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Post by PikesPique on Sept 24, 2012 7:07:39 GMT -8
Leverage: a TV show about con artists.. Hmmm....
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Post by mbeauch on Sept 24, 2012 7:53:06 GMT -8
That and you joined 'em. (/half a catchphrase) Leverage: As with credit cards, car loans, student loans, mortgages, etc., use with care and caution. Not the same, not even close.
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Post by maxmah on Jan 13, 2013 8:03:27 GMT -8
The argument between the pro-split and the anti-split camps reminds me of the argument between Android and iOS users. The Android/anti-split argument is mostly about the technicality behind the split, while the iOS/pro-split side is simply about perception or what the average joe sees. I am a pro-split btw.
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Post by Tetrachloride on Jan 13, 2013 9:21:35 GMT -8
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Post by mbeauch on Jan 13, 2013 9:45:24 GMT -8
Very interesting. Would love to see PO gone.
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