What about Apple now?

[ziggy29]

When Buffett buys tech, Hell has frozen over.

 

[NW-Bound]

Oh boy! Buffet buying tech. What has he done?

It's "Fire and brimstone coming down from the skies! Rivers and seas boiling! Human sacrifice! Dogs and cats living together! Mass hysteria! Forty years of darkness! Earthquakes, volcanoes!"

We are toastally doomed.

 

[Texas Proud]

When Buffett buys tech, Hell has frozen over.

Oh boy! Buffet buying tech. What has he done?

It's "Fire and brimstone coming down from the skies! Rivers and seas boiling! Human sacrifice! Dogs and cats living together! Mass hysteria! Forty years of darkness! Earthquakes, volcanoes!"

We are toastally doomed.

From an article I read, it was NOT him...

They said there are a few people in the org who have $10 billion to invest and they said it was one of them....

 

[nash031]

People talk about Apple "no longer being a growth stock" - but they were never priced like one. The P/E has always been absurdly low, even when the growth rate was incredible.

Correct, but they certainly behaved like a growth stock in the early- mid-2000s. Now, they're definitely a worthy value stock if you're not afraid of the tech sector. It still remains the only individual stock we own.

Obviously, this wasn't a Buffett move himself. He's actually said he would "never buy Apple". Buffett himself only bought tech a few years ago when he bought IBM, which is down 20% since his purchase according to what I read. (Makes me want to look into them!).

 

[kcowan]

They have become the Coca Cola of electronics. They are unique in the marketplace and it is not because of unique technology.

Agree.

Buffett himself only bought tech a few years ago when he bought IBM, which is down 20% since his purchase according to what I read. (Makes me want to look into them!).

Right. When the stock has a PE under 10, a reasonable dividend and a healthy buyback target, what is not to like!

 

[NW-Bound]

Hmmm.... I have owned tech stocks, lots of them. But never Apple. Maybe I should get some now, as a dividend-paying stock and not a growth one.


PS. Done. Well, not quite but I have a put ask out, in effect offering to buy Apple at $91.60 (it is currently at $94.55). Expiry in June. Will see if there's any taker.

 

[papadad111]

Why not buy a call ?

Was selling a put cheaper ?

 

[NW-Bound]

I bought LEAPs on other stocks some years ago, but they did not work out for me.

As for selling puts now, it is because I suspect the market may drop some more, hence my pessimistic stance.

 

[Fedup]

I did sell some puts on the xlk a few days ago. It has Apple. Why xlk? I was trading out of my mutual fund and into ETF. This ETF seems to fit the price range for that account.

 

[NW-Bound]

Uh Oh! Someone just bit my AAPL put. I may end up owning this stock and have to hold it a while, same as the Gilead put that was assigned last month.

 

[Fedup]

Uh Oh! Someone just bit my AAPL put. I may end up owning this stock and have to hold it a while, same as the Gilead put that was assigned last month.

Congrats! You are now on track to become the next protege for Warren Buffet. At least you are 15 dollar cheaper.

 

[papadad111]

Keep us posted.

In a downside market it Seems selling a put gives you a lot more unknown downside risk versus buying a call because u may get stuck with buying the underlying security at a price higher than where the market eventually stabilizes ..

 

[Fedup]

Keep us posted.

In a downside market it Seems selling a put gives you a lot more unknown downside risk versus buying a call because u may get stuck with buying the underlying security at a price higher than where the market eventually stabilizes ..

I think of it as part of my permanent portfolio at a discount. I don't buy individual stock any more.

 

[NW-Bound]

Keep us posted.

In a downside market it Seems selling a put gives you a lot more unknown downside risk versus buying a call because u may get stuck with buying the underlying security at a price higher than where the market eventually stabilizes ..

That was my thinking, but it did not work out for me on other stocks. Let's take AAPL at $94.xx as of this writing.

A LEAP call expiry Jan 2018 costs you $12.70 for strike price of $95, or $7.20 for $110. Which one would you prefer?

I could buy the $95 strike, and AAPL languished below $95 for the next 2 years, I would lose the $12.70. If I bought the stock outright, I would at least get some dividends.

Or I was more bullish on Apple, and bought the $110 strike price. AAPL moves up, but barely at $110. I would lose my $7.20, while a straight purchase of the stock would give me a return of 110/94 = 17% in 1-1/2 years plus the dividends.

In the past I bought LEAP 2 years out on some stock, thinking the stock should move up enough in that amount of time to give me some profits. It barely got up there by expiry. My option became worthless. It continued to move up, but I was already out.

Man, it's not that easy.

 

[NW-Bound]

People talk about Apple "no longer being a growth stock" - but they were never priced like one. The P/E has always been absurdly low, even when the growth rate was incredible.

Emphasis on was.

 

[papadad111]

@Fedup.

Question : if the put gets triggered you're stuck buying the shares from someone who you sold the put to......

Since u don't hold individual stocks, Do you then just buy from the put holder and immediately sell the securities to someone else on the open market ?

 

[Fedup]

@Fedup.

Question : if the put gets triggered you're stuck buying the shares from someone who you sold the put to......

Since u don't hold individual stocks, Do you then just buy from the put holder and immediately sell the securities to someone else on the open market ?

I think I will end up buying ETFs. I will then sell call on my ETFs.

 

[Totoro]

There is risk of a shift in consumer sentiment, but at this price it would have to be dramatic to make Apple a bad buy. They are close to a single digit PE and have more cash than any other company in the world.

As long as sales don't fall off a cliff, this stock makes sense to me.

It's a very real and large risk, and when it strikes it comes fast.

Nokia was cash-rich and quite profitable in 2007, with a return on invested capital above 30%, growing in sales and net income at a 20% clip with a net income of 7 billion (EUR). It pretty much had the market cornered in volume and value.

A mere three years later that was all gone, and by 2011 they were loss making and a marginal player. Stock value went down 85% in that period helped along by the 2009 crash.

Not saying that will happen to Apple, I don't know. That fast-collapse risk is probably why the stock is priced as low as it is.

 

[target2019]

This article is a mind-bender.

These 5 Companies Hold Over $500 Billion in Cash | Investopedia

Three-quarters of the cash these five companies hold is overseas.

 

[audreyh1]

Correct, but they certainly behaved like a growth stock in the early- mid-2000s. Now, they're definitely a worthy value stock if you're not afraid of the tech sector. It still remains the only individual stock we own.

Obviously, this wasn't a Buffett move himself. He's actually said he would "never buy Apple". Buffett himself only bought tech a few years ago when he bought IBM, which is down 20% since his purchase according to what I read. (Makes me want to look into them!).

What has always boggled the mind, is that AAPL has usually had a P/E ratio in the teens, quite low now, just under 11. Whereas MSFT sports a P/E ratio of 40, and it only yields a little more (2.9% vs 2.4%).

 

[audreyh1]

It's a very real and large risk, and when it strikes it comes fast.

Nokia was cash-rich and quite profitable in 2007, with a return on invested capital above 30%, growing in sales and net income at a 20% clip with a net income of 7 billion (EUR). It pretty much had the market cornered in volume and value.

A mere three years later that was all gone, and by 2011 they were loss making and a marginal player. Stock value went down 85% in that period helped along by the 2009 crash.

Not saying that will happen to Apple, I don't know. That fast-collapse risk is probably why the stock is priced as low as it is.

It happened so fast because the Apple iPhone, introduced in 2007, drove Nokia out of business (among other things, I suppose). I guess you'd have to wait for the Apple killer company to appear. Then bail.

 

[nash031]

It happened so fast because the Apple iPhone, introduced in 2007, drove Nokia out of business (among other things, I suppose). I guess you'd have to wait for the Apple killer company to appear. Then bail.

But Apple isn't reliant on a single product or even a single segment like Nokia. They have iPhone, iPad leading two sectors of the same ilk, Macs sell well, and they have services lines up now as well. They have also successfully created households run on Apple products (ask me how I know) and are leveraging that advantage to get into home controls ala Nest.

The chances they're driven out like Nokia are slim, but they could certainly lose market share in phones or pads.

 

[kcowan]

The thing I like is their profit share. Even with marginally declining iPhone demand, their profit outstrips everyone. Comparing them to Nokia is one thing but they stack up well against Google, MS, Samsung, HP and a host of other competitors.

 

[harley]

Up almost 10% from the Buffett buy. Darn it! I was so close to my buy order kicking in. Oh well, at least it's good to know I'm valuing something at just about the same level they are. But I doubt if I had bought first it would have driven the stock up 10%.

 

[NW-Bound]

I read a book by Gerald Loeb, a founder of E.F. Hutton & Co., where he said that when you think it is time to buy or sell, just do it at market price and do not use limit order. I have found that, quite often, haggling over a dollar may cause me to lose the opportunity.

On 5/18, when I sold June put on Apple, it closed at $94.56. Today, it closed at $99.62. If I bought it outright, I would have made $5/share. Instead, my put premium for the strike price of $92 only got me $2.36/share. Apple may continue to climb, but my gain is capped at that $2.36.

Oh well, less risk, less reward. Still, the annualized gain on the put works out to around 30%/yr, so I should be grateful and not too greedy.