What's Wrong with Apple?

AAPL

Apple Inc:  The world's largest corporation by market valuation, one of the most recognizable brand names on the planet, a corporation that generates about $150MM in sales every 10 minutes, a company that revolutionized already existing devices that were invented or created by less imaginative designers, a corporation that benefited for having one of the greatest marketers-in-chief and creative geniuses we had even seen (Steve Jobs)… and one could go on, and on, and on… 

In Dec ‘12 Apple held about $137B cash, which is equal to about $145/share. Unfortunately (or perhaps fortunately for others), about $94B of that cash ($99/share) is held offshore.  Offshore cash is not readily available for sharing with shareholders via e.g. dividends, buybacks, domestic acquisitions, etc.  If Apple were to repatriate the offshore cash, they would be liable for taxes in the range of about 30%.

Domestic cash-on-hand can be applied as mentioned above.  This portion equaled about $43B (or $46/share) in December.  Added to Apple’s near term, predictable U.S. cash flow, this would be sufficient to fund Apple's $10B stock-repurchase program and current 2% yield. 

The PC market was likely Apple’s foundation for being viewed as an extraordinary innovator.  Cool factor achieved with the MacBook!

Apple’s incredible success with then new, mega-popular iPod (mid-2000’s) followed their success enjoyed with revolutionized laptops.  No-one wanted to be seen with another MP3 music device and dominant portable music mainstays, like Sony, virtually disappeared almost instantly.  Today, Apple’s fortunes are closely tied to their successful iPhone sales, and – albeit to a somewhat lesser extent – the iPad.

For investors it's interesting to note that Morningstar has a $600 fair market value estimate on the stock price that is currently trading at around $480/share.

Apple Bulls would claim that:

- The smartphone market is growing so fast... even if Apple grew at the market rate the company would enjoy great revenue growth

- The iPad has been Apple's fastest growing product ever, even eclipsing success achieved with the iPod and iPhone

And the Bears may say that:

- Short product cycles cause intense competition, and more competitors are raining on Apple’s parade, more frequently... with products as good, or even better

- Apple has to rely on partnerships with other technology providers like Google, Facebook, Samsung and others, often referred to as Apple’s frenemies

- Many people believe that Apple - without Steve Jobs - suddenly looks quite ordinary, despite its girth as the largest company in the world by market capitalization. 

To this last point above, there can be little doubt that Steve Jobs' passing was a blow to Apple Inc.  He was a one-of-a-kind leader, business master, marketer, perfectionist and the revolutionary behind the creativity and innovation, that is Apple.

What’s wrong with Apple?

Very little, it seems, whatever the current stock price!

Disclosure: No position

Are You Prepared For A Nuclear Attack?

This afternoon, while browsing the news headlines, I came across a YouTube video link with the title above, posted by the news network RT.

It immediately dawned on me that I was not even prepared to go home from work yet.  And then, preparing dinner, once I got home.  But, it also dawned on me how unprepared we are, in general, preparing for the future.

I have blogged many times before on this site about the sad state of U.S. retirement savings.  Note that I’m not picking a fight with Americans.  The same is true of many other countries and their peoples.  I happen to currently live in the most open society on earth.  I am provided with a wealth of content to blog about, along with freedom of speech to complement the available information.  Take that… North Korea!

So no, I am not prepared for a nuclear attack.  I don’t think San Francisco would be a target anyway, what… with its happy people, flowers in your hair, colorful clothing, orange bridge and funky, peace-loving neighborhoods.  When I relocate in a few months from now, I will reassess my preparedness.

But, I am financially prepared for almost anything.  I want you to be too.  You would have to cross many hedges and moats to get at me.  It is my intent to help provide financial literacy in easy-to-understand English.

For example, these 4 rules are easy to understand and follow:

• Earn money by selling something.  That includes selling your services to an employer.  For the highest price you are able to achieve!
• Spend less than what you earn. If you have debt that is not making you money, get rid of it.  A mortgage will not help you build wealth unless you are paying less to service the debt, than what you are earning from whatever you have bought with ‘other people’s money.’  For example, if you have a mortgage on a rental property, the tenant must pay you more than the cost of the mortgage.  What do you mean you live in a fancy house partly owned by a bank, while you incur all the ongoing expenses?
• Start saving what you don’t spend, but not in a bank savings account. Save like an investor, not a saver.  You need a return on your investment.  The 1% interest rate offered by your bank savings account is not enough!  They use your cash to build wealth for themselves and their investors.
• Get help from a trusted advisor before you make investments, unless you’re confident that you know what you’re doing on your own already.  Don’t give a financial advisor any money to manage before he/she has earned your trust.  It’s your money and we live by the golden rule… he who has the gold, rules!

Now, start building your own hedges and moats to protect you and your family. You owe at least that to yourself.  An imminent nuclear attack is improbable, but your approaching retirement is not!