Aapl & Goog

[Danny]

AAPL & GOOG - any thoughts on the current share price in relation to their future growth prospects?

[haha]

Originally Posted by Danny

AAPL & GOOG - any thoughts on the current share price in relation to their future growth prospects?

These type of stocks don't appeal to curmudgeons. That said, I think they are pure momentum plays, such that no matter how god their future prospects may be, the stocks are still wildly overpriced. Doing anything profitable with that knowledge is hard but perhaps not impossible.

Ha

[terminator]

I don't think AAPL is wildly overpriced in light of its recent drop down to $150. It's supposed to earn $5 this year . . . maybe $6 next year (good luck guessing since they keep making money so fast these days). I've owned it since 1991 and I've thought it was ridiculously priced the last few years but they are just an amazing company and all of their products are creating a heck of wave. Right now the iPod and iPhone are leading to much greater sales of the Macs which is where they are really making more money right now. They just have so much potential right now. Not to mention they have zero debt and more than $10 billion in cash.

I don't know if I would buy it today, but I sure wouldn't bet against it.

[Danny]

Originally Posted by terminator

I don't think AAPL is wildly overpriced in light of its recent drop down to $150. It's supposed to earn $5 this year . . . maybe $6 next year (good luck guessing since they keep making money so fast these days). I've owned it since 1991 and I've thought it was ridiculously priced the last few years but they are just an amazing company and all of their products are creating a heck of wave. Right now the iPod and iPhone are leading to much greater sales of the Macs which is where they are really making more money right now. They just have so much potential right now. Not to mention they have zero debt and more than $10 billion in cash.

I don't know if I would buy it today, but I sure wouldn't bet against it.

terminator - thanks for your take - since 1991 - you must have done alright with your investment...good for you!

[terminator]

Originally Posted by Danny

terminator - thanks for your take - since 1991 - you must have done alright with your investment...good for you!

It's funny how things go. My basis is about $13 . . . and as recently as April of 2004 the stock was at . . . $13. So, for the first 13 years I had a 0% return. Then it exploded and now I show a 16% CAGR for the last 16 years. I remember thinking in the 90's (1997?) that they were in danger of going out of business because they were losing money and had about $1 billion in debt and no one wanted to buy a Mac.

I don't know the morale -- sometimes patience and ignoring your portfolio pays off? Or maybe, it pays to have enough winners to make you forget about your losers until they come back? Or maybe just that Buffet is right -- it's hard to gauge what's going to happen in tech companies because things are always changing so fast. If you had told me in 1999 that Apple would be making music players and telephones in a few years I don't think I would have believed it (and after the Newton I sure wouldn't have believed that they would be phenomenally successful at it).

[Danny]

Originally Posted by terminator

It's funny how things go. My basis is about $13 . . . and as recently as April of 2004 the stock was at . . . $13. So, for the first 13 years I had a 0% return. Then it exploded and now I show a 16% CAGR for the last 16 years. I remember thinking in the 90's (1997?) that they were in danger of going out of business because they were losing money and had about $1 billion in debt and no one wanted to buy a Mac.

I don't know the morale -- sometimes patience and ignoring your portfolio pays off? Or maybe, it pays to have enough winners to make you forget about your losers until they come back? Or maybe just that Buffet is right -- it's hard to gauge what's going to happen in tech companies because things are always changing so fast. If you had told me in 1999 that Apple would be making music players and telephones in a few years I don't think I would have believed it (and after the Newton I sure wouldn't have believed that they would be phenomenally successful at it).

..I wouldn't have believed it either...things change and they don't always remain the same...amazing how one person can change the dynamic of a company...my apple got a nice 10% pop today...hope it holds and builds and I can get my 15 bagger

[ERD50]

Originally Posted by terminator

It's funny how things go.

....

I remember thinking in the 90's (1997?) that they were in danger of going out of business because they were losing money and had about $1 billion in debt and no one wanted to buy a Mac.

Well, 2 out of 3 is pretty good - it was 10 years ago after all. Seems like an eternity

They actually had about a billion in CASH at the time, no debt. That's one of the things that made me a buyer of AAPL in 1997. But yes, they were losing money, and sales were way down. Their product line was a mess (one reason for the poor sales and high costs), and their attempts to 'modernize' their OS were floundering.

But they still had a bunch of loyal customers, and the market didn't value that fully, IMO. The iMac, while I don't think it was really a very good value, was at least 'good enough' to get the Apple faithful with pent-up demand for something new to open their wallets. And the streamlined product line helped them to focus and lower their costs. Steve Jobs ran with it from there. He's made some great decisions, and plenty of lousy ones. But overall, it seems to be working for them, and the shareholders.

There was a thread a while back about 'forever stocks'. I didn't read much of it - stories like this make me think the concept is a bit odd. Who knows what a company might do in the next 20 or 30 years? The nifty-fifty? Successful ones fall off the map, others rise from nowhere, or out of the ashes.

-ERD50

[terminator]

Originally Posted by ERD50

They actually had about a billion in CASH at the time, no debt.

Yes, they had a billion in cash, but the balance sheet at fiscal year end, 9/26/97 showed $951 million in long-term debt. That was paid down (and off) over the next 4-5 years. At the time their current ratio was fine, I was just worried they would blow through the cash, have the debt and start needing to borrow more. A billion dollars is a lot when you aren't making any money.

But they still had a bunch of loyal customers, and the market didn't value that fully, IMO. The iMac, while I don't think it was really a very good value, was at least 'good enough' to get the Apple faithful with pent-up demand for something new to open their wallets.

It's odd, I started life as a Mac user and then ended up going to Windows because I was tired of the high prices on Macs and because there was so much less software available for them. But I was well aware of the faithful customers and their near-religious fanaticism for the products. Not me, I bought cheaper PCs and invested the difference.

There was a thread a while back about 'forever stocks'. I didn't read much of it - stories like this make me think the concept is a bit odd. Who knows what a company might do in the next 20 or 30 years? The nifty-fifty? Successful ones fall off the map, others rise from nowhere, or out of the ashes.

I think that gets back to the Buffett comment about judging tech companies. I don't think you can look twenty years out and have a clear idea about what computers and operating systems and gadgets will look like. But you can probably have a good idea that P&G/KMB/Clorox will still be making shampoo and soap and household cleaners, that Coca-Cola/Pepsi will be selling soft drinks, that people will be insuring against loss and that doctors will be using J&J's scalpels, bandages, joints, drugs, etc.

[ERD50]

Originally Posted by terminator

Yes, they had a billion in cash, but the balance sheet at fiscal year end, 9/26/97 showed $951 million in long-term debt.

OK, must be my memory that is failing on me then, I thought the balance sheet was overall more positive than that, I guess not.

No question they were burning through it fast.

But I was well aware of the faithful customers and their near-religious fanaticism for the products.

I think only a small (but vocal) percentage were 'fanatics'. The reality is, once you put time in on one platform, there is some 'inertia' keeping you there. I think the vast majority of the 'loyalists' just preferred to stick with the Mac, partially out of 'inertia' - it wasn't a religious type thing at all for most. I think that idea is way over-blown.

I was ready to switch in 2000, but decided to hang with Apple. Now, with the advances they have made with OSX, I'm glad I did. There are plenty of things I dislike with Apple, but overall, I prefer it to the alternatives. But that's just me - I don't get religious about this. No point, take a look, buy what meets your individual needs. Seems pretty simple to me.

-ERD50

[kcowan]

I was shopping on craigslist for a new notebook PC. many of the ones for sale were less than a year odl and being sold for half price. Several of the sellers were moving to the new iMac (which is a beauty).

Young kids raised on iPods are selecting the Macs as their first machine. A separated friend's daughter used a PC at Mom's place and a Mac at Dad's, and selected the Mac for her first computer. Go into any Apple store and watch the buyers. Very impressive. The conversation is about applications.

We bought 1200 shares at $13 about 4 years ago and sold off 900 at $78. We will hold the remaining 300 until there is a substantial reason to sell. Their PEG is a little high to accumulate but they seem to keep growing into their valuations.