Hedge Fund: ‘Apple Might Become Obsolete in 2-3 Years’

| Analysis

Pedro de Noronha, managing partner at hedge fund Noster Capital, ain't got no truck with these newfangled tech companies, including Apple. The problem, he said, is that you don't know where they'll be in 5 to 10 years. Even Apple, according to him, could be "obsolete in two to three years."

Pedro de Noronha on CNBC

Pedro de Noronha on CNBC

"I’m a value investor and I’m a medium-to-long-term investor," he said in an interview on CNBC (full video below the fold). "I need to know where a company is going to be in five to ten years."

He had more, though, saying, "Look at Apple, a company that we all admire. I love Apple. I don’t own its shares but I own a lot of their products. I don’t know where they are going to be in three years. It’s a very competitive landscape. They might become obsolete in two to three years as we've seen dozens and dozens of technology companies."

Sometimes there's a fine line between an Apple Death Knell and merely making yourself look foolish, but Mr. de Noronha is treading that line with gusto. He's not saying Apple will have become "obsolete," a choice of words I attribute to English being his second language. He's just saying, heck, you never know—it could happen.

He has a point. Any company—every company—could lose its way, either overnight or over the course of years. And if you squint your eyes just right and look at Apple's history, its track record, its philosophy, its unique whole widget business model, its recent hires, its acquisition strategy, its massive investment in its supply chain, the pattern of innovation revealed in its patent applications...

If you look at all of those things by printing them out on thousands of sheets of paper, stacking them up in neat piles, put those piles into a wind tunnel, and then turn on that wind tunnel, it's easy to see how Apple could become "obsolete" in 2-3 years.

Or not.

Mr. de Noronha has a solid record at his hedge fund, but that doesn't mean that he groks the world of technology. Here's the full interview:

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

Comments

palenoue

I’m willing to bet this guy would have bought a lot of stock in Circuit City, because up until the bankruptcy they looked like they were going to be around for a long time and would do everything they could to maximize shareholder profits.

vpndev

I will admit that, since it’s late in the evening, I did not listen to Mr. de Noronha’s piece. I probably will in the morning.

As for an analyst saying “yeah, this could happen”, well I could ask my friends at the corner the same question and get the same answer. The reason he is in his corporate position is because he is supposed to have rationale and details supporting his analysis.

“Could” is both free and useless.

“Probably will, because ...” is valuable and, typically, expensive.

So why is anyone paying any attention to useless stuff?

And, if he has a corporate sponsor, is there a conflict of interest? Or investment holdings? Maybe not, but did anyone ask? D’uh.

Lee Dronick

What is his track record?

vpndev

Interesting. When I google’d “Noster Capital” the first entry was not for Noster Capital, but for LinkedIn to see if you’d like to work there.

Perhaps “Noster Capital” does in fact have a web site. However it does not appear on the first page at google. I see entries from seeking alpha, hedge week, dailymail.co.uk, hedgefundintelligence and others. Most are not recent (a year or more old).

So I ask - who is this guy and what are his creds. If any ??

Was this piece based upon nothing other than his CNBC item?  If so, then why is it here? If there’s more then please show the details.

mhikl

The thing with investor analysts is that the absence of a brain doesn’t seem much to matter.
“I need to know where a company is going to be in five to ten years.” says Pedro de Noronha: such a point seems like an incredibly poignant statement, except, who does?
With a crystal ball such might be possible but it’s all a pig in a poke as to the value of the pig in five or ten years. Look how Apple has filled its barn to the detriment of the competition with its slayer gizmos since the second coming.
Bryan, your statement “Any company—every company—could lose its way, either overnight or over the course of years.“ says it all! Still, I had to have my fun.
Bry, me thinks you should offer your skills on lucidity to the lunacy of people such as Pedro de Nob-Head.

Jules Hobbes

Wait – isn’t Warren Buffett thinking along the same general lines?

JustCause

In 2-3 yrs the world may not exist. Anything is possible, but what are the odds?

geoduck

It’s “analysts” like this that make me not trust anything anyone that calls themselves an ‘analyst’ says. It appears that the whole bunch are either inept or corrupt.

Lars Pallesen 1

“I need to know where a company is going to be in five to ten years.”

With that requirement I wonder which companies this guy HAS invested in? Does anybody know where ANY company is going to be in ten years?

CCardona

Like my Guru used to say “Atom Bomb is thrown, don’t worry about it!” But I still LOVE the ADK (Apple Death Knell): Idiots On Parade!

ctopher

vpndev: they do have a web site, but it doesn’t show in google because it’s useless.

http://www.nostercapital.com

Lee Dronick

They might have more on their website if you can sign in, or they may not.

ibuck

If you’re a budding entrepreneur begging for capital, wouldn’t you have to advise investors of your business plan and where you plan to be in 5-10 years? This is not Apple’s situation.

If you’re trying to get people to commit their money to your hedge fund for 5 years or longer, they indications of what to expect in that time frame. Apple won’t tell you what’s going to happen next month, next week, or even tomorrow. Will this guy ever hold Apple stock? Probably not.

BTW, Noster means “our” in Latin, as in “our capital.” (And you’re not getting it till you reveal your plans?)

wab95

Bryan et al:

I know I’m late to the party (occupational hazard when I’m in the field), however, in fairness to Mr de Noronha, he appeared to be merely explaining why he himself does not invest in tech stocks, citing Apple as an example.

Two things come out of that one statement.

1) His tacit admission that he does not understand tech stocks, ergo Apple, which is, in fact, a statement of humility and acknowledgement of his limitations. He’s not predicting Apple’s demise, but merely acknowledging that, so limited is his understanding of the field, that he cannot tell if a company with the outsized footprint of Apple will be around in 2 - 3 years. That’s like someone saying, ‘I’m so poor of a marksman, I couldn’t hit the side of an elephant at one metre’s distance’; which is not the same thing as saying, ‘Elephants have nothing to worry about from hunters’.

2) Apple’s mindshare is alive and well. Here is someone being asked why he doesn’t invest in tech stocks, and which company, out of all the companies in the business, does he, without any hesitation whatsoever, cite? Apple. Not only does he cite Apple, but openly professes to like the company and use their products. No public ‘dis’ here at all, but an endorsement of what the company is doing, in the context of saying that it remains as opaque and mysterious to him as a black box from which marvels emerge.

Personally, as an Apple client, I couldn’t be more pleased and less nonplussed by his comment. It is the comment of an honest man.

wab95

Bryan:

BTW, I just listened to TDO 20140725, and now realise that you, Jeff and Kelly made the key point I posted above in even greater detail, rendering my post redundant.

I nonetheless had fun writing it, even if it is superfluous.

Lee Dronick

You bring up some good points Doctor, but if he doesn’t know about techs stocks then he shouldn’d have said what he said about Apple.

wab95

Lee:

Your point is well-taken. He could have kept his comments strictly generic, however he chose to mention someone, I believe, for illustrative purposes and added emphasis.

I believe that had his comment been something like, ‘I don’t know if Apple will even be around in another 2 - 3 years or if it will be here well beyond a 1000…’ much of the miff would’ve been muffled amongst Apple supporters.

Given its chequered and at time precarious history, Apple supporters are, I believe, sensitive to comments suggesting a lack of longevity, relevance, innovation or anything else indicative of peril to the company.

Lee Dronick

The problem is that what he said could be taken out of context and repeated making it sound as if he was an authority. Apple is a very proper gander

http://www.tep-online.info/fable/gander.htm

Lee Dronick

What he said could be taken out of context and repeated to the effect that someone with knowledge has said that Apple could be obsolete. Apple is the very proper gander.

http://www.tep-online.info/fable/gander.htm

wab95

@Lee:

Brilliant.

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