I think this is another way of looking at the "Steve Jobs Risk Premium." (what's the opposite of a premium?) Apple's stock price is not highly valued relative to growth and income, making the company undervalued. The best argument for this undervaluation being rational is that people think that all of the magic comes from Steve Jobs.
I think Jobs is a good leader, but the Magic is more widely distributed than that, and this means that Apple is probably a good buy.
While nobody may be able to raise the cash to do a complete acquisition of the whole company, the same financial metrics that make this appealing (if you could raise the cash) make the stock appealing for those who can raise the cash to buy only $3,000 of the company, or $30,000 of the company, or whatever fraction.
Personally, I'm being irrational. When Apple was $13 a share and had $6 in cash, I thought it was a screaming buy, but didn't invest because of fear. Now that failure then is holding me back, as investing now would be confirmation that failing to do so then was a mistake. I felt Apple was outside my circle of competence... but that was a rationalization.
That Apple is the most valuable tech company in the USA is a rationalization that somehow they must go down in value. I don't think that is wise.
"But the Magic is more widely distributed" still relies on magic to justify Apple's market valuation. It's bascially a "this time the rules are different argument," - the sort of argument that historically precedes the bubble's burst.
Considering how Apple came to their current position doesn't provide much reason for optimism that they can repeat their success of the past ten years (hence the talk of magic). Apple got where they are by leveraging commodity MP3 players into an entire product line of Pods, Pads, and Phones based upon being an early mover in the post Napster music business (and with the app store they even managed to sell a fair number of Macs to iPhone developers). The importance of Napster's demise towards Apple's success should not be underestimated.
Apple could encounter such good fortune again, but it is difficult [of course] to see anything in their current product portfolio, the regulatory environment, or the logistics of digital content delivery that offers similar opportunities [again of course].
Looking deeper, the dearth of new iPad competitors may be more indicative of the size of the actual market for slate devices than an indicator of the shortcomings of Apple's competitors - e.g. the slate type device my UPS driver carries indicates the sort of dedicated device design which benefit businesses and some of the shortcomings of Apple's vision within a business model. Magic doesn't cut it.
Given that Google has not even existed as long as Steve Jobs has in this second coming, there is no reason to think they can do anything consistently ever ... or learn from their mistakes in they way Apple has done better than the great majority of companies.
You could apply your negative reasoning to most tech companies in this new Dot Com Bubble.
Fact is, Apple has been through positive learning curves.
3 comments
[ 4.6 ms ] story [ 31.7 ms ] threadI think Jobs is a good leader, but the Magic is more widely distributed than that, and this means that Apple is probably a good buy.
While nobody may be able to raise the cash to do a complete acquisition of the whole company, the same financial metrics that make this appealing (if you could raise the cash) make the stock appealing for those who can raise the cash to buy only $3,000 of the company, or $30,000 of the company, or whatever fraction.
Personally, I'm being irrational. When Apple was $13 a share and had $6 in cash, I thought it was a screaming buy, but didn't invest because of fear. Now that failure then is holding me back, as investing now would be confirmation that failing to do so then was a mistake. I felt Apple was outside my circle of competence... but that was a rationalization.
That Apple is the most valuable tech company in the USA is a rationalization that somehow they must go down in value. I don't think that is wise.
Considering how Apple came to their current position doesn't provide much reason for optimism that they can repeat their success of the past ten years (hence the talk of magic). Apple got where they are by leveraging commodity MP3 players into an entire product line of Pods, Pads, and Phones based upon being an early mover in the post Napster music business (and with the app store they even managed to sell a fair number of Macs to iPhone developers). The importance of Napster's demise towards Apple's success should not be underestimated.
Apple could encounter such good fortune again, but it is difficult [of course] to see anything in their current product portfolio, the regulatory environment, or the logistics of digital content delivery that offers similar opportunities [again of course].
Looking deeper, the dearth of new iPad competitors may be more indicative of the size of the actual market for slate devices than an indicator of the shortcomings of Apple's competitors - e.g. the slate type device my UPS driver carries indicates the sort of dedicated device design which benefit businesses and some of the shortcomings of Apple's vision within a business model. Magic doesn't cut it.
You could apply your negative reasoning to most tech companies in this new Dot Com Bubble.
Fact is, Apple has been through positive learning curves.