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Post by Lstream on Feb 8, 2013 21:15:14 GMT -8
I'd like to nominate the following exchange for some type of guide on how to successfully post in forums. It's clearly both insulting AND accommodating which allows ones point to be expressed in the vehement manner intended...,but...,the recipients volleyed in like kind with intelligence and wit. Well played sirs! Well played. I must admit I read the first post with dread, thinking crap, here comes another food fight, then the next two posts thinking wow, I'm seriously impressed. THANK YOU, JD and BENOIR! +1. Those posts were brilliant.
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Post by ibuyer on Feb 8, 2013 21:20:39 GMT -8
Buybacks shrink share count. Whether it is good to use capital towards a buyback is dependent on 2 factors.
1. The price of the shares versus the value 2. The opportunity cost of the capital.
If Apple can buy back share for 500 that is worth 750. Thats is value accretive. If Dell is buybacking share worth 15 for $25 then it is not. Share buybacks alone do not make a shit business good or vice versus. However, if Mr. Market wants to underprice Apples value and Apple is confident on it future prospects. Then, buybacks are value accretive. Remember Apple is the very definition of INSIDER. TC/PO/BOD knows what models can be launched and what their long term strategy is. They have asymmetry of information in this case can and should be used to Apple Shareholder advantage.
Apple is on the record saying that they had excess capital since 1 last year with Apple less than 100$/sh. They now have 145 and growing about 40-45 $/yr. Returns on cash is ~1%. Returns on purchasing shares is 10% FCF yield. Apple has excess cash and can not allocate it properly. Therefore, it should return it to shareholders.
45B in 3 years is complete BS. If Apples stick to this plan it will have over $250 $/sh in cash at the end of the period.
It is a misconception that a stock buyback says anything about the underlying product and business. Look at Visa, Mastercard, IBM to name a few. I have not heard investors complaining about the growth of Visa or Mastercard. Both are close to all time highs trading at high teen multiples.
In sum, Buybacks are not the holy grail. They are tool that should be deployed the betterment of long term holders. Apple still needs to dominate it competition. A steady increase of dividends to attract dividend growth/value investors should be considered too. Why the strawman is set up as Apple has to choose is beyond me.
Apple please use ALL the tools in your toolbelt. And consider other tools too.
JD, IBM is a clear candidate where stock buybacks well as clear forward medium term guidance have enhanced returns. So has Visa and MA
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Post by lovemyipad on Feb 8, 2013 21:21:09 GMT -8
Any theories that buybacks will increase shareholder value are incomplete if they don't include aberrations to EPS/PE valuation theory. I'm talking about the Prince, no King, of zero earnings, declining growth and accelerating PE growth...AMZN Facebook, Netflix and Twitter are a couple more. AAPL is trading well below the S & P 500 average, yet only a very few in its category (if any) operate with its gross margins, revenue growth, market share growth and EPS growth. What's wrong with AAPL cannot be "fixed" with a simple share buyback. It will take learned investors (of which there are not enough among the retail sector) actually studying Apple's 10Qs and conference call transcripts, doing comparative analysis against its competitors, and not relying on the sound bite opinions of people just as uninformed as themselves to turn this puppy. For what its worth, it appears the learned are making those buying decisions now, and not waiting for someone else to tell them the water is fine. What have the learned been doing for the past five months?
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Post by ibuyer on Feb 8, 2013 21:25:14 GMT -8
I must admit I read the first post with dread, thinking crap, here comes another food fight, then the next two posts thinking wow, I'm seriously impressed. The heck with that, I wanted to see spaghetti on the walls. ;D MB, at Greenlight, has been top long AAPL since 2010. He owns more than 1.3M shs or over $600M. A friend of AAPL shareholders for sure.
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Post by mbeauch on Feb 8, 2013 21:32:50 GMT -8
The heck with that, I wanted to see spaghetti on the walls. ;D MB, at Greenlight, has been top long AAPL since 2010. He owns more than 1.3M shs or over $600M. A friend of AAPL shareholders for sure. What does that have to do with spaghetti?
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Post by nathanstevens on Feb 8, 2013 21:33:34 GMT -8
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Post by Unique on Feb 8, 2013 21:42:37 GMT -8
I don't doubt that some TA person made those predictions somewhere. But I would also bet that many others made all kinds of wrong calls. With enough predictions and guesswork, someone is always bound to be right. Show me a statistically relevant study, based upon sound methodology that proves that these calls are not pure fluke, and they are good enough to overcome transaction costs, and I will have a look. I had a very sharp finance prof in business school that essentially proved just then opposite with a lot of rigour. Anecdotes prove nothing. Unfortunately I think we have quite a few TA enthusiasts here and elsewhere who have been smoked because they had undue confidence in this stuff. Now their accounts are in shambles. Those are indeed valid points of critic or skepticism. Trading is a just a game of probabilities on pattern setups/signals/price confirmations. Hence, trading is like probabilities in poker and in general life on a daily basis. A statistically relevant study on trading itself is hard to conduct in this case because there's a large variety of factors that would greatly influence the report and that may give a flawed analysis. However, there are backtesting softwares in trading that gives you the statistics on a particular setup. You could even look at HFT/quants program earnings, which can prove the feasibility and profitably of TA. The real problem is as humans, we have emotions. Therefore, when some get over confident or cocky and don't stick with their disciplinary rules in trading. It would very likely lead them into a disaster scenario like what you shared above. So a good TA trader is a calm soul that follows their rules in order to achieve consistency, hence the probability game. With that being said, many people in the world just trade for a living and then probability divides them into winners and losers. I don't suppose you want me to show you my accounts?
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Post by mbeauch on Feb 8, 2013 21:50:24 GMT -8
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Post by Lstream on Feb 8, 2013 22:03:27 GMT -8
No, because it would not prove anything. That is one of the deceiving pieces to this whole area. Probabilities can line up such that an individual can become a mid to long term winner. Even with such simple techniques like coin tosses. So much so that they are deemed to be some kind of guru. Then it all comes to an end, and it is time for a new guru.
Maybe you are one in a million, and have some kind of clairvoyant technique that all the PhD. Quants, with multimillion dollar computers, and all the research money can buy, cannot match. If so, then congratulations. In the meantime I am off to buy a bridge.
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Post by Unique on Feb 8, 2013 22:19:53 GMT -8
No, because it would not prove anything. That is one of the deceiving pieces to this whole area. Probabilities can line up such that an individual can become a mid to long term winner. Even with such simple techniques like coin tosses. So much so that they are deemed to be some kind of guru. Then it all comes to an end, and it is time for a new guru. Maybe you are one in a million, and have some kind of clairvoyant technique that all the PhD. Quants, with multimillion dollar computers, and all the research money can buy, cannot match. If so, then congratulations. In the meantime I am off to buy a bridge. Using that logical, your biased view discredits most if not all of the WS traders, DIY traders, HFT, Quants, PhD traders that use backtesting statistics. Very well then. There's a famous quote by Josh Billings that sums up this convo, should check it out.
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Post by Lstream on Feb 8, 2013 22:54:39 GMT -8
To clarify, my comments are not directed at the pros and all the tools they have. This all started with the implied claim that some amateur day traders here on AFB could consistently call top and bottoms. That is the claim I don't believe, and I also don't believe it would pass any rigorous evaluation and analysis.
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Post by bryanyc on Feb 8, 2013 23:04:01 GMT -8
One person's confidence is another's cautious optimism (me). I still don't like that gap to 470, but AAPL did hold higher the entire day. Point of reference for next WTF downwave? ;D (God I hope not) That gap is 28c. Not a biggie. If you want to worry about a gap worry about the gap at 427.57 from a year ago that is a still open $6+ from our 435 low. I do. I think we will find resistance at the top of our gap down from the previous low of 483.38 pre Jan earnings. It was astounding to see AAPL come all the way back from 700 to the 430 gap: truly a lesson there. I'd like to start a poll: how many think we will make a new all time high this year? A simple question. Personally, I wouldn't bet against it, let me put it that way . And this isn't just an idle thought: I currently have a spread (a Jan 14 600 - 650). I could just sell the lower leg, book a large loss, and let the short leg ride against the long Jan 15 500's that I have bought, which would turn negative at beyond 750 this coming January. I don't like that position and won't bet against AAPL at 700 + by next January. Better be safe In my naive thinking, our fair value (not that it is a true guide for stock price) is in the mid 600's at the moment, and close to 800 by Jan 2014, and there is no way that I would be caught short on those numbers.
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Post by Unique on Feb 8, 2013 23:11:44 GMT -8
To clarify, my comments are not directed at the pros and all the tools they have. This all started with the implied claim that some amateur day traders here on AFB could consistently call top and bottoms. That is the claim I don't believe, and I also don't believe it would pass any rigorous evaluation and analysis. So this is just a mere skepticism comment against me like 2 years ago. No biggie. The very first post already had the answer to your argument: [As we have seen many times, many technical traders including myself had called the tops and bottoms of AAPL. Google has cached the old AFB forum, you could go take a look. ] You can go do your own rigorous evaluation and analysis to ensure its credibility. DIY traders like the admin and I that have similiar trading programs and tools as daytrading desks at GS, JPM, MS, BAC but you're saying we can't trade like them on the exact same setups? Interesting. What about let's say the folks at t3live, same tools, same setup. They aren't "pros".
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Post by mace on Feb 9, 2013 1:11:40 GMT -8
Show me a statistically relevant study, based upon sound methodology that proves that these calls are not pure fluke, and they are good enough to overcome transaction costs, and I will have a look. I had a very sharp finance prof in business school that essentially proved just then opposite with a lot of rigour. Anecdotes prove nothing. Having a good tool and a sound methodology don't make one a successful trader. Speedy decision-making and risk management is key. If you don't have to be right all the time to be successful, in fact, too accurate can lead to a big loss (even bankruptcy) as you would lull into making too big and too risky a bet. Heed the fate of those geniuses in LTCM. I've made tons of money investing in AAPL, yet I don't feel is because of sound methodology, sound understanding of Apple fundamentals or due diligence. Just pure luck, is my destiny. Keep working on it, it may be your destiny to be successful too, you can't win a lottery without buying a ticket. Hmm ... may be you can, someone give to you ;D.
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Post by mace on Feb 9, 2013 1:18:05 GMT -8
DIY traders like the admin and I that have similiar trading programs and tools as daytrading desks at GS, JPM, MS, BAC but you're saying we can't trade like them on the exact same setups? Interesting. What about let's say the folks at t3live, same tools, same setup. They aren't "pros". To me, a pro is not about tools or understanding setups or being mostly right. Is trading like Jim Cramer, yes, Jim Cramer. He was on the wrong side when 2000 dotcom bust, lost a ton. He quickly changed to short and made back the losses + tons of money. This is pro trading.
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Post by roni on Feb 9, 2013 6:16:30 GMT -8
Last year we got the dividend announcement. I hope that it is clear to Apple that they need to address capital allocation issues by providing information about a multi-year period.
What are Apple's intentions on share buyback and dividend programs? I think the answer to this question, beyond addressing only the dividend increase for the next year, is needed.
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Post by Lstream on Feb 9, 2013 7:24:11 GMT -8
What does any of this have to do with my destiny? Good read about the lottery tickets though. I don't buy them.
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Post by Lstream on Feb 9, 2013 7:32:52 GMT -8
Hate to break this to you, but no it is not about you. You jumped in after I made a comment to Sponge about TA being right on this entire down move, and now the alleged bottom. For some reason, you saw that as an opening to tell us how awesome you are, and just like the old days to start up about the performance of your account. (I see now you have since edited out that comment about being up 10x last week.) Same kind of stuff that got you kicked off AFB1. Hopefully we are not in for a repeat performance of that experience.
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Post by lovemyipad on Feb 9, 2013 8:29:16 GMT -8
Having a good tool and a sound methodology don't make one a successful trader. Speedy decision-making and risk management is key. If you don't have to be right all the time to be successful, in fact, too accurate can lead to a big loss (even bankruptcy) as you would lull into making too big and too risky a bet. +1 As previously mentioned, the most difficult aspect of trading is the emotional component. IMHO, long-term successful trading has less to do with being right (Plan A: right direction, right target, right calls) and more about knowing what to do when you're wrong (Plan B: cut losses, get out, change direction, move to sidelines, reenter with more clarity). I'm wrong all the time, far more often than I'm right; thus Plan B is imperative.
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Post by jeffi on Feb 9, 2013 8:47:41 GMT -8
I saw this too late to post on the intraday thread, so I'll post it here. Any theories that buybacks will increase shareholder value are incomplete if they don't include aberrations to EPS/PE valuation theory. I'm talking about the Prince, no King, of zero earnings, declining growth and accelerating PE growth...AMZN Facebook, Netflix and Twitter are a couple more. AAPL is trading well below the S & P 500 average, yet only a very few in its category (if any) operate with its gross margins, revenue growth, market share growth and EPS growth. What's wrong with AAPL cannot be "fixed" with a simple share buyback. It will take learned investors (of which there are not enough among the retail sector) actually studying Apple's 10Qs and conference call transcripts, doing comparative analysis against its competitors, and not relying on the sound bite opinions of people just as uninformed as themselves to turn this puppy. For what its worth, it appears the learned are making those buying decisions now, and not waiting for someone else to tell them the water is fine. Typically, we have pro and con views regarding stock buybacks. Much of these contrasting views originate from the inconsistent results of share buybacks. I'd argue (yes, I like to argue), that both camps are correct. In other words, it depends. A stock buyback trades cash for a larger claim on future earnings. Therefore, if future earnings are to grow faster than the return on the cash, then all things being equal, the stock buyback should add to shareholder wealth. On the other hand, if future earnings are to decline, buy backs destroy shareholder wealth. Unfortunately, its not that simple. Of course all things are not equal. If the current valuation of said stock is overvalued (e.g., high PE), and it's valuation is coming down (PE compression) than even growing earnings will not prevent a stock buyback from destroying shareholder value. And conversely, if a stock is severely undervalued with declining earnings a buy back may still add value. Now that I've muddied the waters, I'll try to bring back some clarity. If Apple's stock is correctly valued or undervalued (defined as valuation will be the same or higher in the future, e.g., PE expansion) and if earnings per share will increase in the future, then a stock buy back will ultimately add to shareholder wealth. On the other hand, If Apple's stock is correctly valued or overvalued (defined as valuation will be the same or lower in the future) and if earnings per share will decrease in the future, then a stock buy back will ultimately destroy shareholder wealth.
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Post by mbeauch on Feb 9, 2013 9:03:59 GMT -8
Am I the only one who is annoyed with the direction the board has taken in the last one/two weeks? Just curious if it is a me problem. I can fix me problems.
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Post by Deleted on Feb 9, 2013 10:05:25 GMT -8
No, because it would not prove anything. That is one of the deceiving pieces to this whole area. Probabilities can line up such that an individual can become a mid to long term winner. Even with such simple techniques like coin tosses. So much so that they are deemed to be some kind of guru. Then it all comes to an end, and it is time for a new guru. Maybe you are one in a million, and have some kind of clairvoyant technique that all the PhD. Quants, with multimillion dollar computers, and all the research money can buy, cannot match. If so, then congratulations. In the meantime I am off to buy a bridge. Using that logical, your biased view discredits most if not all of the WS traders, DIY traders, HFT, Quants, PhD traders that use backtesting statistics. Very well then. There's a famous quote by Josh Billings that sums up this convo, should check it out. Here's one I like, "I don't understand, it should have worked".
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Post by lovemyipad on Feb 9, 2013 10:14:03 GMT -8
Gregg, that was ME at 585 and 475, run over by southbound trains.
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Post by Deleted on Feb 9, 2013 10:25:59 GMT -8
Typically, we have pro and con views regarding stock buybacks. Much of these contrasting views originate from the inconsistent results of share buybacks. I'd argue (yes, I like to argue), that both camps are correct. In other words, it depends. A stock buyback trades cash for a larger claim on future earnings. Therefore, if future earnings are to grow faster than the return on the cash, then all things being equal, the stock buyback should add to shareholder wealth. On the other hand, if future earnings are to decline, buy backs destroy shareholder wealth. Unfortunately, its not that simple. Of course all things are not equal. If the current valuation of said stock is overvalued (e.g., high PE), and it's valuation is coming down (PE compression) than even growing earnings will not prevent a stock buyback from destroying shareholder value. And conversely, if a stock is severely undervalued with declining earnings a buy back may still add value. Now that I've muddied the waters, I'll try to bring back some clarity. If Apple's stock is correctly valued or undervalued (defined as valuation will be the same or higher in the future, e.g., PE expansion) and if earnings per share will increase in the future, then a stock buy back will ultimately add to shareholder wealth. On the other hand, If Apple's stock is correctly valued or overvalued (defined as valuation will be the same or lower in the future) and if earnings per share will decrease in the future, then a stock buy back will ultimately destroy shareholder wealth. There is a simple flaw in your statement, and that regards valuation. Finding two people that agree on value at the same time is just a little more than difficult. Couple od examples: just look at the wide range of future values projected by WS analysts, or in every trade (buyer thinks its going higher/seller doesn't. Value is not an objective determination, it is completely subjective. So increasing/decreasing the number of outstanding shares has little impact, if any, on investors. Certainly not enough to make a difference A buyback would have to change the subjective reasoning behind an investor's estimate of value. It can't do that, for the very reason you gave above, some investors think earnings are going to grow, and others don't. Until this week I think more felt the future of Apple was dark. What has to change is Investor Sentiment. That's why I don't use the acronym of PE. It measures the right thing, but it use has been corrupted. The results of the calculation indicate Investor Sentiment, therefore in my view it should be called Investor Sentiment Multiplier (ISM). The ONLY thing that can change investor sentiment are results coupled with management's guidance. If it isn't there, nothing artificial (like a stock buy back) is going to change it.
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Post by lovemyipad on Feb 9, 2013 10:29:57 GMT -8
Am I the only one who is annoyed with the direction the board has taken in the last one/two weeks? Just curious if it is a me problem. I can fix me problems. What, you want more spaghetti or less spaghetti? I want less!
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Post by rezonate on Feb 9, 2013 10:57:16 GMT -8
Am I the only one who is annoyed with the direction the board has taken in the last one/two weeks? Just curious if it is a me problem. I can fix me problems. I actually see a glimmer of the old glib banter today. The AAAA club reminded me of our IOTW flying pig award. Regarding lottery tickets, everyone knows they are just a tax on people who are bad at math.
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Post by valere on Feb 9, 2013 11:03:17 GMT -8
My ideal scenario would be TC stating at the shareholder meeting,.. Dear schareholders I am sorry we hogged your cash so much, Steve was a bit paranoid after almost being bankrupt .. Here is our plan.. 1) We feel like we need to have 50 billion in the bank ...we like it as a safety cushion.. therefore given that by the end of next quarter we will have around 150 Billion in the Bank , we will execute a 100 billion dollar buy back ( adjust of taxes ) 2) Going forward as long as we have 50 billion in the bank , we will pay out 100 % of all our earnings in a dividend to shareholders, 60 days after earnings are announced. If we make 13 dollars per share in the quarter the shareholders will get 13 dollars per share for that quarter, if we make 0 you get zip.. If we see the need to accumulate more cash for a specific acquisition we will communicate that to the shareholders and temporary suspend the dividend. 3) In order to make the stock more affordable for the smaller investor , we will split the stock 10 for 1
Y'all have a great day
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Post by tuffett on Feb 9, 2013 11:18:00 GMT -8
Typically, we have pro and con views regarding stock buybacks. Much of these contrasting views originate from the inconsistent results of share buybacks. I'd argue (yes, I like to argue), that both camps are correct. In other words, it depends. A stock buyback trades cash for a larger claim on future earnings. Therefore, if future earnings are to grow faster than the return on the cash, then all things being equal, the stock buyback should add to shareholder wealth. On the other hand, if future earnings are to decline, buy backs destroy shareholder wealth. Unfortunately, its not that simple. Of course all things are not equal. If the current valuation of said stock is overvalued (e.g., high PE), and it's valuation is coming down (PE compression) than even growing earnings will not prevent a stock buyback from destroying shareholder value. And conversely, if a stock is severely undervalued with declining earnings a buy back may still add value. Now that I've muddied the waters, I'll try to bring back some clarity. If Apple's stock is correctly valued or undervalued (defined as valuation will be the same or higher in the future, e.g., PE expansion) and if earnings per share will increase in the future, then a stock buy back will ultimately add to shareholder wealth. On the other hand, If Apple's stock is correctly valued or overvalued (defined as valuation will be the same or lower in the future) and if earnings per share will decrease in the future, then a stock buy back will ultimately destroy shareholder wealth. There is a simple flaw in your statement, and that regards valuation. Finding two people that agree on value at the same time is just a little more than difficult. Couple od examples: just look at the wide range of future values projected by WS analysts, or in every trade (buyer thinks its going higher/seller doesn't. Value is not an objective determination, it is completely subjective. So increasing/decreasing the number of outstanding shares has little impact, if any, on investors. Certainly not enough to make a difference A buyback would have to change the subjective reasoning behind an investor's estimate of value. It can't do that, for the very reason you gave above, some investors think earnings are going to grow, and others don't. Until this week I think more felt the future of Apple was dark. What has to change is Investor Sentiment. That's why I don't use the acronym of PE. It measures the right thing, but it use has been corrupted. The results of the calculation indicate Investor Sentiment, therefore in my view it should be called Investor Sentiment Multiplier (ISM). The ONLY thing that can change investor sentiment are results coupled with management's guidance. If it isn't there, nothing artificial (like a stock buy back) is going to change it. Maybe this amazing Investor Sentiment Multiplier (ISM) will expand once Apple is clear they are doing something useful with their cash (dividend increase, larger buyback, whatever). Crazy thought, isn't it? It's incredible how you see no link between investor sentiment and Apple's historical disregard of addressing shareholder value. Absolutely incredible. Also, a stock buyback is only as artificial as stock dilution is - in other words, it isn't artificial at all. You probably won't see this post since I am probably on your ignore list, so I guess you will just perpetuate your flawed reasoning.
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Post by Lstream on Feb 9, 2013 11:30:01 GMT -8
Gregg - setting aside the debate on sentiment for the time being, what do you think they should be doing with the cash? Are you saying leave it alone and let it keep growing?
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Post by tuffett on Feb 9, 2013 11:30:12 GMT -8
My ideal scenario would be TC stating at the shareholder meeting,.. Dear schareholders I am sorry we hogged your cash so much, Steve was a bit paranoid after almost being bankrupt .. Here is our plan.. 1) We feel like we need to have 50 billion in the bank ...we like it as a safety cushion.. therefore given that by the end of next quarter we will have around 150 Billion in the Bank , we will execute a 100 billion dollar buy back ( adjust of taxes ) 2) Going forward as long as we have 50 billion in the bank , we will pay out 100 % of all our earnings in a dividend to shareholders, 60 days after earnings are announced. If we make 13 dollars per share in the quarter the shareholders will get 13 dollars per share for that quarter, if we make 0 you get zip.. If we see the need to accumulate more cash for a specific acquisition we will communicate that to the shareholders and temporary suspend the dividend. 3) In order to make the stock more affordable for the smaller investor , we will split the stock 10 for 1 Y'all have a great day A slight modification: - Keep $100B on hand (commit $40B to an immediate buyback) - Make it clear that Apple will use their cash reserve to step in when it feels shares are undervalued (this is huge) - Regular dividend growth to match earnings growth - Pay out 60% of earnings (minus the regular dividend) as special dividend when stock is at relative highs or buyback when stock is at relative lows Result: - immediate boost to share price (probably...) - long term dividend growth and reduction of float - semi-regular special dividends to provide incentive to hold shares - solid floor in share price - perhaps reduced volatility - cash keeps growing but at a more moderate pace - everyone should be happy
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