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$AAPL, AAPL:US, Apple, circle of competence, deferred taxes, disruption, economic moat, growth investing, growth vs. value, innovation, Margin of Safety, Philip Fisher, Steve Jobs, technology, value investing, Warren Buffett
We all know the type: Born-again value investors who still have that new car smell. No longer clueless, but the market hasn’t beaten adequate sense (or humility) into them just yet, so they’re still insanely over-confident. Which we tolerate – after all, we were like them once – then they start expounding their new & improved value investing philosophy, and it all goes downhill. I recall one encounter, some years back, where I struggled to get a word in, let alone offer some kind of reality check. Finally, my new guru was forced to pause & finally breathe, so I did the only sensible thing. I lobbed this hand grenade:
So why not buy Apple..?!
All I got was a puzzled look. Repeating the question, I then pummeled him with a veritable laundry list of Apple (AAPL:US) fundamentals & ratios. If he was such a value expert, surely Apple was a screaming value buy?! Needless to say, I never got much of a reply, but it stopped him in his tracks & scared him off…job well done! But the more I thought about it, the more it seemed like a valid question for other investors (& even me…). And a question to be asked in a spirit of honest inquiry. I mean, let’s look at Apple’s numbers today:
- Net sales have reached $216 billion (as of FY-2016).
- Net sales increased 99% & over 1,000% in last 5 & 10 years, respectively.
- Gross margin increased to 39% ($84 billion) in last 10 yrs.
- Op profit margin more than doubled to 28% ($60 billion) in last 10 yrs.
- Net income increased 76% & almost 2,200% in last 5 & 10 yrs.
- EPS compounded by 16% pa & 38% pa in last 5 & 10 yrs.
- Net cash/investments inc’d almost 1,400% to $151 billion in last 10 yrs.
- Current share price (as of cob Feb-7th): $131.53
- Current market cap: $690 billion
- Current P/S ratio: 3.2 times
- Ex-net cash/investments P/S ratio: 2.4 times
- Current P/E ratio: 15.7 times
- Ex-net cash/investments P/E ratio: 12.1 times
- Current FCF ratio: 13.2 times
- Ex-net cash/investments FCF ratio: 10.1 times
OK, just take a moment & marvel…even with the share price now approaching all-time highs again, surely Apple’s still a screaming value buy?
So why not buy Apple..?!
Ever since, I pose this question to fellow value investors on a regular basis…but I’m not sure I’ve ever received a satisfactory reply!? As in: ‘Yes/No, I bought Apple/I decided not to buy Apple – based on a detailed analysis & the following specific attributes’. Instead, people tend to shrug their shoulders, roll their eyes, flash a rueful grin…and maybe toss out one of the usual objections. I’m sure you can guess a few:
- But Apple’s frickin’ market cap is almost $700 billion now!?
- It’s far too well-researched/efficiently priced for investors to have an edge.
- A much cooler/better/cheaper brand surely comes along for the kids to buy.
- It will inevitably hurtle off a cliff into technological obsolescence/irrelevance.
- The micro-cap sum-of-the-parts thesis we discussed is far more interesting.
- Jobs is dead…the company’s going off the rails any
daymonthyear now. - Look at the bloody chart…who’s gonna buy it now, after that rally?!
Now, before the fan-boys start to lose their minds, this is where I should reveal this post is NOT about Apple. No, really.
Sorry, fan-boys…
Study the long-term chart of any outstanding growth stock & it’s quite obvious most of the objections above are just red herrings. Part of a litany of excuses too many value investors trot out to justify hiding within their own circle of competence comfort. Because we fear the risks & challenges of the unknown. Instead, we reject (or simply ignore) entire sectors & hundreds/thousands of companies, because we’ve decided they’re just too large, too expensive, too unpredictable, too uninteresting, to be worthy of consideration.
And then we cite Buffett: Always remain within your circle of competence! Except this rule would imply buying no individual stocks…since newbie investors should always choose passive investing initially, as the most prudent choice! And anyway, Buffett evolved his investing approach & continually expanded his circle of competence over his entire career. [Yefei Lu’s new Buffett book offers good perspective]. Mere mortals should emulate such an evolution – not Buffett himself! Unless you plan on being a deca-billionaire too…then you can avoid/invest in anything you damn well please!
Let’s not forget, when Buffett started out, technology was a nascent sector – which required a VC approach – something he clearly wasn’t too comfortable with. [But read Philip Fisher again: Now, he was a great venture capitalist – albeit one who chose to invest in listed companies]. And technology-related hype/promotion during the Go-Go Years probably compounded this aversion, which Buffett rationalised as avoiding the sector’s obvious unpredictability. Except that never stopped him from investing in the likes of banks & retail!? Which are potentially just as lethal & unpredictable…but obviously they were sectors in which he was actually comfortable investing.
But in sticking religiously to his comfort zone, Buffett also displayed his true genius… His apparent caution is deceptive – rest assured, he never doubted his investing ability. Instead, he deliberately chose to leverage his prowess in a new & more aggressive way, via the use of long-term interest-free insurance float & deferred taxes. Of course, the potential risks of taking on such significant leverage ensured he would remain laser-focused on investing (primarily) in predictable sectors/businesses, and obviously inspired his two main rules:
Rule No. 1: Never lose money.
Rule No. 2: Never forget Rule No. 1.
Couple this with super-human patience, and fifty years later it seems almost inevitable Buffett’s accrued an entirely unique investment record.
Whereas we don’t have the luxury of float. And it’s 2017: We live in a world where technology & innovation play an ever increasing role, for decades now, in all aspects of our economy, workplaces & daily lives. And technology isn’t (necessarily) any more unpredictable than biotech/pharma, fashion, media, retail, natural resources, emerging/frontier markets, etc. But it deserves far more focus & study…since its potential impact on other sectors, in terms of innovation & disruption, is obviously far greater today (& as we look ahead). [With autonomous trucks now being tested on open highways, it’s both astonishing & alarming to realise truck driving may still be the most common male occupation in the US (almost 3 million drivers)!].
A value investor who deliberately avoids technology/other such (unpredictable) sectors is foregoing a world of investment opportunity – especially now, when an ever increasing share of economic value-creation is derived from technology, not to mention other intangible assets/intellectual property. And trapped in a low-growth low-return world (like today…or in due course, as debt & entitlements keep escalating), such investors may end up condemned to choosing between: i) traditional blue chip/Buffett classics (e.g. food/beverage stocks) which now seem to trade at ever-expanding multiples (vs. historic & prospective earnings growth), or ii) traditional value stocks which can perhaps no longer rely on a rising tide of growth, inflation & animal spirits. Who can afford such risks & opportunity cost?
But for many value investors, we’re far more comfortable with the numbers, rather than the story itself…which is, potentially, our downfall. [And vice versa for growth investors]. The hard assets & cheap metrics of your typical value stock offer the siren song of safety, whereas investing in high quality/growth stocks may require a far more demanding leap of faith. Except value stocks are often mired in bad management, bad business models, bad industries & dreadful capital allocation – with little hope of compounding their intrinsic value – the best we can hope for is a realisation of intrinsic value.
If you’re a human computer who loves to re-rank & re-invest in the world’s cheapest stocks every day, such an event-driven portfolio may be rewarding (& the studies do claim value beats growth), but in the real world how many investors manage to deliver sustained long-term out-performance with such an approach? Maybe a passive computer-driven portfolio is the better solution, especially when the greatest human computer of them all (i.e. Buffett) has long abandoned such an approach. In the end, value investing will always be a marvelous valuation tool & framework for investing, but its greatest failing doesn’t lie in the stocks it green-lights for you to buy…
It actually lies in the stocks it persuades you NOT to buy!
I suspect most value investors will freely acknowledge this failing. And embrace the proposition that investing in high quality/growth stocks is ultimately a far more attractive way of compounding long-term portfolio value (particularly on a tax-deferred basis), IF ONLY it weren’t so bloody difficult! Because such an investing approach must inevitably be driven by qualitative, not quantitative, analysis. And it conflicts with having our cake & eating it – we want the best companies and the best prices! In reality, we need to compromise & choose wonderful companies at fair prices, not fair companies at wonderful prices. Which actually offers a far more compelling value equation, since time is the friend of the wonderful company, the enemy of the mediocre.
And so, paying up is often required – well, at least from a traditional value perspective – which, almost inevitably needs to be justified via comprehensive study of the company & its management, its capital allocation, its products & business model, its industry dynamics, and (most of all) whether it enjoys a significant, sustainable & (ideally) an expanding competitive advantage (i.e. an economic moat). An exercise which is surely infinitely more challenging than assessing & ranking a bunch of value metrics. And one which can go horribly wrong – a busted value thesis may engender some rueful sympathy (wow, who knew management were such idiots..!?), but paying up for a high flier just before it collapses will inevitably attract a perfect storm of hindsight & sniggers for making such a bone-headed investment decision. But then again, nailing even a single multi-bagger growth stock might yield a payoff value investors can only ever dream of…
Of course, today the answer might not be Apple…but next up there’s a world of other compelling investment opportunities out there just waiting to be explored. Which means it’s still an excellent question to kick off your search:
So why not buy Apple..?!
Wexboy 
This is a great article and I understand your thesis. I’m a proponent of good valuation technique such as DCF and quality relative valuation when investing — of course this is only for experienced investors as novice investors should stick to broad market mutual funds and ETs. Now, here’s my point – sometimes you have to leave the numbers behind and use your gut. My gut tells me that Apple isn’t the best investment today for a few reasons:
1. No economic moat – there are lots of quality competitors out there. A firm like Facebook has a true economic moat. Facebook can be stagnant for a few years and it will be totally fine, but Apple has to produce a brand new phone every single year to maintain current profit level.
2. Randomness – when a company reaches the top of the pack like Apple has, there are too many random elements that can go wrong to bring it down. Even if things are amazing, you must acknowledge that luck and chance played somewhat of a role in determining the world we see today. If that’s the case, we’re at what can be considered a local max for Apple but it’s more likely that as time goes by — and random events pile on — things will never to the mean (this is quasi-mean reversion).
3. Changing tech world – Apple depend on the iPhone but the world is moving toward augmented reality, artificial intelligence, and pervasive computing via the cloud on any screen you can log into. This might eat away at Apple’s dominance.
All of these are “feelings” and “intuitions” while the numbers still say that Apple has a great P/E relative to the market, of course.
Thanks.
Well, the post was never really intended as a defence of Apple…more an offence on a typical failing of value investors!
But I do think the misconceptions – good & bad – about Apple are fascinating. Personally, I’ve always thought of Apple as primarily a software/design company, rather than a hardware company…that’s why it’s always been able to charge premium prices, but it’s only in the last few years that’s become far more obvious financially (as Services becomes a larger/more stand-alone behemoth). But for potential investors it’s always been a challenge – they either don’t see that underlying reality, or they simply find it too hard to look past/ignore the hardware ‘risks’. Even Buffett struggled with that, obviously – it’s interesting that he finally resolved it by identifying Apple as a much-loved ‘sticky’ consumer product/brand.
And I think the hardware risks are possibly overstated – no matter how many times Apple proves itself in terms of hardware,that business will inevitably attract a poor multiple, one that’s a discount to the market & a severe discount to its Services business. So it seems obvious that valuation disconnect will have to be ultimately addressed by the company anyway…
Regards,
Wexboy
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New to Ireland so really appreciate your analysis and willingness to make a call on a stock. If I am looking to access equity research (domestic & int’l), can you recommend a cost effective way?
Hi DG Investor,
Ta – that’s a tough one – for private investors in general, let alone those looking for Irish equity research. Some UK & US brokers will provide coverage on a few of the largest Irish stocks, but PIs will find it hard/impossible to access. For broad Irish coverage, an actual account with Davys or Goodbodys is the most obvious bet, but even then they can be a bit stingy/awkward about providing research to their less moneyed/favoured clients.
I don’t pay a lot of attention to broker research myself, so I don’t really know of any other alternatives. But obviously the most cost-effective source is right HERE…it’s free! And I don’t think it matters much if my last write-up on a particular stock is a little out of date – with any good business, the story doesn’t necessarily change all that much – and you still need to roll up your sleeves & read a few of the company’s annual reports before buying anyway.
Cheers,
Wexboy
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Not to mention…Buffett’s obviously OK with a $7 billion+ bet on $AAPL!!!
https://finance.yahoo.com/news/warren-buffetts-berkshire-increased-apple-stake-212725511.html
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Readers,
I always look forward to reading the RV Capital Letters from Robert Vinall, but particularly his most recent letter, where I was delighted to see him share a similar focus/perspective as I was mulling over/drafting for this post. And it’s certainly no overnight revelation for him either: This philosophy/perspective has obviously guided him in the last couple of years (same is true for me, in the last year or so), looking back over the evolution of his investing & stock picks (inc. $FB in the latest quarter!). Well worth reading his letter:
Click to access Co-Investor_Letter_2016_EN.pdf
That link may well be blocked – if so, I still recommend you register (it’s quick & free) here to read this & other letters:
http://www.rvcapital.ch/
Cheers,
Wexboy
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Hi Wexboy
I enjoy your articles. This is perhaps the first one I’ve read where I get the sense that you’re leaning towards the GARP or QARP (Quality as opposed to Growth) approach. This is something I like to think I follow. I wrote an article on AAPL on Seeking Alpha not too long ago the thesis of which is very similar to the argument you make here. Please read it if you find a few minutes. I would be delighted to get your feedback/thoughts on the case I make in that article. The link is as follows:
http://seekingalpha.com/article/4009063-apple-free-cash-flow-behemoth
On a similar theme I also wrote about two other stocks, namely SBUX and MA.
Would love to hear your thoughts.
Best wishes
Imran Siddiqui
Hi Imran,
Actually, I’d always have described myself as a GARP investor too – I’ve owned many of the well-known growth stocks at one time or another, including $SBUX. In fact, for me, my SBUX experience highlights a generally ignored problem for the vast majority of growth investors…actually managing to hold on high quality growth stocks for the long term! All we ever hear about in books & the media are huge growth stock windfalls, but how many investors have you/will you ever meet who in reality have held on to an individual stock for many many years & made 1,000s of % in gains?! Maybe a good topic for a post or two at some point in the future…
Your article/thesis makes sense to me – I think the real problem with Apple is binary: On the one hand, you have many investors who are perfectly willing to buy Apple – and noting its fundamentals, it’s nearly always an easy sell…by which I mean it’s pretty much always a buy for them at almost any price! But on the other hand, you also have just as many investors who may refuse to ever seriously consider Apple, let actually buy it – in which case, the fundamentals and/or its valuation are unlikely to ever sway them (in fact, the cheaper the valuation, the more they’re persuaded it’s really a bad buy/value trap!). In the end, as I’ve said, it’s not about Apple – it’s about challenging yourself as an investor to always have an open mind & to always seek to expand your circle of competence.
I’ll take a look at your other posts also.
Cheers,
Wexboy
Hi Wexboy. I am delighted that you read my post on AAPL and that in your opinion the thesis made sense. I completely agree with your view regarding how “binary” the investor community’s perception is of AAPL. It would be very exciting for me to hear what you think of my thesis on SBUX as well – long term holding for me. Once again I can’t help but agree with your thoughts on the general tendency on the part of growth investors to sell too early. I think the real trick or the holy grail would be to find the Starbucks’ of the world when they’re still young and cheap, and perhaps most importantly with a long runway ahead of them. I have recently started on a project to try and identify exactly such businesses. Small companies with rapid growth and long term growth potential, capital efficiency (unusually high return on tangible net assets), a safe balance sheet and a reasonable valuation. Thank you once again for taking the time to read the piece and for responding. Best regards, Imran .
Hi Imran,
Your $SBUX post is on my to-do list…but you’re (painfully) reminding me the last time I owned SBUX: I made a pretty quick 100%, then exited because the valuation/run-up was looking a little too steep. So I had to shake my head yesterday…reading an article which reminded me SBUX has actually rallied 1,100% since 2009 (despite its more recent share price malaise)!?! A reminder that often the hardest part of buying growth stocks isn’t buying them, or even realising gains on them…it’s NOT participating in the huge long-term rally after you realised your measly gain & proudly told people ‘you never go broke taking a profit’!
While finding young growth stocks, or established growth stocks suffering a short-term problem/reversal, is maybe a cheaper & higher potential strategy, it’s also a lot more difficult to execute than it seems like with case studies & a bit of hindsight. [I’d suggest $CMG as the perfect live case study…even if you think it gets back on track, the current steep valuation (vs. current fundamentals) also presents a daunting challenge…though obviously some shops (like Pershing & Sequoia) are now diving in]. And it doesn’t actually address the problem of selling growth stocks too early either…so ultimately, for most investors, I suspect that’s the real/toughest investing problem we all need to think through & to try address/solve.
Regards,
Wexboy
Hi Wexboy
I couldn’t agree more. As Buffett has reminded us time and again that his”favourite holding period is forever”, one needs to train one’s mind to hold on to wonderful businesses for the long haul, notwithstanding the inevitable challenges any business will face along its growth path. I believe that once we identify a wonderful business (simple, leadershiip position in a stable industry, demonstrable growth runway, high returns on capital, operating leverage, unusually high returns on net tangible assets (secret sauce), abundant FCF, conservative balance sheet, and a shareholder friendly management with a good capital allocation track record), we need to hold on to it, CHD is a perfect example.
Dec 02 Dec16 Growth factor
Rev/share 4.2 13.3 3.2x
EPS 0.27 1.75 6.5x
FCF/share 0.3 2.31 7.7x
Tangible BV/share 0.07 -3.47
Stock Price 5.1 49.56 (current) 9.7x
GM% 30% 46%
NM% 6% 13%
FCF margin 7% 17%
CAPEX/Rev 3.7% 1.4%
Tangible Assets/Total Assets %
67% 34%
I look forward to your feedback on SBUX as and when you get the opportunity to glance through.
Best regards
Imran
Hi Wexboy
I enjoy your occasional column, including the funny asides!
Like you, I am an active private investor. For me, itâs very serious business, as my entire pension fund (and more) is totally invested in shares (I donât have any funds or bonds in my pension portfolio).
I have been a long-term holder of Apple. I set out my thoughts (at the time) in an article that I got published in the Sunday Times in December 2015. I thought you might find this historic (in the sense of time past rather than noteworthy!) article worth setting beside your own current views on the share. For what itâs worth, Iâm still invested in Apple, but not as heavily as at that time. The damage The Donald could do to it (and many other companies) with his shenanigans worries me.
Sadly, I donât have an outlet for my thoughts on investments any more: the Sunday Times dispensed with my services around this time last year. I think that my espousal of the DIY approach to investing didnât go down well with the advertisers, who were trying to get readers to buy into whatever snake oil they were using to lure the unsuspecting punters! (Donât quote me!!).
Keep it up!
Colm
It seems that the attachment to my earlier email (the relevant page of the Sunday Times of December 2015) didn’t reproduce. For anyone interested, the original article was is as follows (and remember that these were my thoughts in December 2015, not today):
Apple Corporation, famed for its iPhone, iPad, etc., sharply divides investor opinion. Some think it is grossly undervalued, but the market price sets the equilibrium between buyers and sellers, so the believers must be balanced by an equal weight of investors who think it’s overvalued. I have been a believer ever since I took my first bite of Apple in December 2012 at $73 a share. (The actual share price at the time was $510 but a 7 for 1 stock split in June 2014 gave me seven times as many shares at one-seventh the price.) I added to my holding a number of times since then at prices ranging from $72 to $130, compared to the current $117 a share. On average, I am just about breaking even in dollar terms but the stronger dollar ($100 was worth €77 in December 2012, is worth €92 now) puts me ahead in Euro terms.
Apple’s results announcement for the year to 30th of September 2015 was an opportunity either to reaffirm my faith or to join the ranks of nonbelievers. The company’s profits for the year were $9.22 a share, equivalent to an earnings yield of 7.9% at the current share price. That is a very high yield for what is arguably the leading technology company of our age. It is the type of return we want from a staid company operating in a mature industry; we demand a higher return from such companies to compensate for the risk that earnings may stagnate or even fall in future.
Apple’s earnings per share grew by 43% in 2015 and by an average of 34% per annum over the last five years. For companies that consistently achieve growth of this order, investors are normally satisfied with an earnings yield of 5% or less; equivalent to a Price/Earnings (P/E) ratio of 20 or more (P/E ratio is the inverse of earnings yield). Facebook, for instance, has a P/E ratio close to 100. Applying a P/E ratio of 20 to Apple’s earnings of $9.22 implies a share price of $184.40, more than 50% above the current price.
Why is Apple’s share price so low? The reason is that the market – the unbelieving part of it anyway – apparently thinks that Apple’s best years are behind it, that it has limited scope to grow and could even decline in future. It is easy to see where the sceptics are coming from. The iPhone is Apple’s most popular product, selling a phenomenal 231 million units in fiscal 2015, up 37% on 2014. It accounts for two thirds of Apple’s total revenues. iPhone sales must eventually decline and the market is unsure what will replace it.
In my opinion, Apple is far from a spent force. Sales in greater China are still growing strongly: they grew by 84% in the last fiscal year and the momentum is expected to continue through fiscal 2016. India, another massive market, has been a relative laggard but is now the recipient of a strong marketing effort and sales there are expected to grow significantly. Apple has also demonstrated a great ability to persuade existing customers to upgrade to newer models and, contrary to expectations, is winning customers from Android devices. This success has much to do with the fact that Apple is close to, or has already attained, the status of a luxury brand. Luxury brands have greater longevity, command premium prices – and normally have high P/E ratios.
Apple is investing $8 billion a year in research and development. Some of that goes on upgrades to existing products but Tim Cook, Apple’s CEO, has said that the car is the ultimate mobile device, hinting at where some of the R&D money is being spent, and I would not be surprised if Apple moves into the motor market in the not too distant future, either on its own or in partnership with a major motor manufacturer. That could create an entirely new revenue stream.
Apple’s dividend is only $2.08 per share, equivalent to a dividend yield of just 1.8% at the current share price. The low dividend yield is not because Apple is short of cash: on the contrary, it has net cash of more than $150 billion, or over $27 a share. Instead of paying a higher dividend, Apple is using its excess cash to buy back shares from investors, thereby reducing the number of shares in issue. In effect, it is making its own shares something of a luxury item. For example, in 2015 Apple’s profits grew by 35% but earnings per share (EPS) grew by 43% because the denominator in the EPS calculation, being the number of shares in issue, fell by 5.4% due to share buybacks.
The strong dollar means that sales growth outside the US can translate into zero growth or even sales declines in dollar terms. Arguably, by investing now when the dollar is strong I am also exposed to the risk of the dollar depreciating against the Euro, but a weaker dollar would mean higher sales in dollar terms, which would compensate in large measure for any loss of value from a weaker currency: it’s a case of swings and roundabouts.
At the current share price I am more than happy to maintain my high exposure to Apple. I’m hoping that this particular Apple will not fall to earth.
Here’s that article:
http://www.thesundaytimes.co.uk/sto/news/ireland/article1641770.ece
Many thanks, Colm!
It’s a serious business for me too…and unless you think we’re on the verge of a ridiculous valuation/leverage-induced bursting bubble, equities are inevitably the best long-term bet for any investor. Which means cash/bonds are very rare for me – either proceeds to be soon reinvested (average in), or if I really do feel nervous I’ll focus instead on more event-driven/alternative investments.
Not sure why your Apple article/link didn’t come through for you – I’ll add it below (though I presume the pay-wall will kick in & stymie a lot of people).
I’m not saying Trump isn’t serious about introducing tariffs, but for decades now American consumers have actually voted with their wallets – they’ve consistently chosen cheaper foreign imports & to hell with Main St and American jobs… Voting for Trump doesn’t mean that’s changed, everybody loves a politician (or non-politicians) who tells the sweet lies they want to hear & promises them impossible solutions. Let’s just wait & see what happens – I don’t think Americans are going to be too thrilled waking up one day to huge price increases across the board for much of their favourite stuff (or facing up, finally, to the painful reality that a major portion of American industry has long priced itself out of customers/existence). And also, with every year/decade, more & more economic value creation comes from intangible assets/intellectual property – as the US government’s painfully learned (due entirely to its own uncompetitive tax position), it’s much much harder to nail down (& tax) the ownership/domicile/source of this value creation!
And yes, the Sunday Times doesn’t strike me as the natural home of DIY investing – you should think about finding a new home for some articles!
Good luck,
Wexboy
Very true.
Very true!
Your speech is common when then market is up. You don’t find stocks a good price and you feel that you have to act and your mind start to change. I tell you why don’t. You think that you will guess the marvellous future in a stock. Margin of security exist to avoid your inability to see the future. And you talk about the future in a stock in the long term…No sense man!
And if I visit your house…I’ll be sure to use a bit of tact.
Anyway, I disagree: As I’ve stressed before, I always have plenty of new ideas & potential buys stacked up, the struggle is deciding what to actually pull the trigger on… I could just as easily put together a portfolio of deep-value stocks (for example, trading for less than 40p on the pound) today, as I could focus on buying high quality/growth stocks. [Maybe I should do both..!?] It’s not about paying up now because market valuations are much higher, or due to a dearth of ideas/value – it simply reflects the fact that certain stocks/companies are worth paying up for, while others clearly aren’t. Such a distinction doesn’t change the reality that, in terms of individual stocks & outcomes, there will obviously be (hopefully, occasional) disappointments in BOTH categories…but as I highlighted above, the upside potential for a genuinely outstanding growth stock is a multiple of what you could ever hope to achieve with a value stock. That’s what the post is about – considering the choice between wonderful companies at fair prices vs. fair companies at wonderful prices.
I think we all fear of the story. Regardless of the numbers, are they past their prime? Can they comete with other great companies that offer basically the same product at a much cheaper price? I always though of Apple as a fashion company, not a technology one. And always feared they will go out of fashion
Yes, Apple offers a trifecta of fashion/technology/closed-system risks…and it’s priced to reflect that?!
Goes back to what I said: Analysing the historic numbers doesn’t necessarily help – whether it’s actually an obvious bargain may depend almost entirely on your qualitative analysis…