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catoismymotor (60.25)

AAPL is now *The Man*.

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8

August 21, 2012 – Comments (4) | RELATED TICKERS: AAPL , MSFT , GOOG

Good Morning,

Okay. I understand the emotional aspect behind the hype: It's the biggest company in the history of the world! It's up 62% in the last twelve months! They've won one for The Gipper! (Steve Jobs).

But I remain unimpressed. MSFT reached this same mark a decade ago and look at how fortunes have changed. I know AAPL and MSFT and two different animals but they are still leviathans. I'm not a fan of leviathans at this point in my investing life.

I'm normally a *the glass is half full* person but if I were to put any money on the future of AAPL it would be as a short. The global economy is a mess, and will be for the next five to ten years. That alone will be a drag on revenue no matter how sleek, shiny or cool the latest offerings happen to be. Simply put: People will be drawn to less expensive offerings from competitors. Also the hipster/fanboy, white earbud wearing, coffee drinking  arrogant ones abhore anything mainstream or corporate. AAPL is now bigger than GOOG, XOM and WMT. Thus they are uncool, unhip and *the man*.  Said hipster/fanboy core is small but very tech savy, vocal and influential. If they love you they sing your praises. And if they hate you you'll be shunned faster than an Amish boy that ran away to the big city. If AAPL does not keep this core of elitist smuglodites happy then you'll see that share price start to drop faster than silk pants at a proctologist's office. So it remains to be seen how much AAPL will be willing to sacrifice in revenue to keep this segment of their customer base happy in order to preserve share price.

Those are just my thoughts after one dose of caffeine. I may read this later and question my own rationale.

Cheers,

Cato

P.S. - I do not own any individual shares of AAPL. I believe GLRE, which I own, has some shares as part of their portfolio.

 

 

4 Comments – Post Your Own

#1) On August 21, 2012 at 11:11 AM, MegaShort (99.95) wrote:

"MSFT reached this same mark a decade ago and look at how fortunes have changed."

The nominal price comparison is unimportant and has no predictive power. When Microsoft had a $620B market cap, it traded at 82x earnings. Microsoft has made tens of billions of profit since then but shareholders have lost hundreds of billions. In contrast, Apple's earnings are much more likely to benefit current shareholders since it sells at a reasonable multiple.

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#2) On August 21, 2012 at 10:08 PM, awallejr (79.94) wrote:

I have to go with Mega on that one.  I have an Iphone 3g and plan on buying the 5g.  I suspect a lot of others are as well.

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#3) On August 21, 2012 at 10:45 PM, NOTvuffett (< 20) wrote:

i have no doubt that apple has a large fan-base.  i just don't see how its capitalization is justified by current revenues, or even projected ones.  what will they have to invent next?  a magic wand? lol

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#4) On August 22, 2012 at 9:31 AM, Turfscape (41.23) wrote:

^

I'd agree with your comment on whether the market cap is justified if AAPL was trading at a multiple of 40. But, it's trading at a multiple of 16. That's not completely out of line...particularly for a company that is still exploring new markets (such as television).

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