Impending share buyback?

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    Posted: 27 February 2012 02:09 PM

    This article argues for a share buyback, sound like WB’s view.  Omacvi - If Apple does a buyback, you should take back your comment that TC and its managers are not after money.  Their RSUs would be worth a lot more with share buyback.  Share buyback bolsters Apple badges’ and our pockets but SJ doesn’t want to encourage such “easy” money, let see whether TC thinks otherwise.

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    Posted: 27 February 2012 04:28 PM #1

    Mace - 27 February 2012 06:09 PM

    This article argues for a share buyback, sound like WB’s view.  Omacvi - If Apple does a buyback, you should take back your comment that TC and its managers are not after money.  Their RSUs would be worth a lot more with share buyback.  Share buyback bolsters Apple badges’ and our pockets but SJ doesn’t want to encourage such “easy” money, let see whether TC thinks otherwise.

    I agree with your observations regarding the benefits to TC and management via a buyback.  SJ also was frustrated with the undervalue of the stock.  I just think he had too much on his plate to truly pursue a strategy that would enhance the value of aapl.  He pushed it off like he pushed off surgery.

    A buyback is even more complex then a dividend because the longer one waits the more it will cost the company to buyback its shares.  They must have some targets in mind but those get moved almost every day.

    I can see a three year buyback plan and then issue a very small dividend at that time.  As much as TC talks about no split, I think it will have to happen sooner rather then later.  The higher the stock price goes the smaller the pool of first time investors.  This stock should not be available only to the institutions and WS big boys.

    I still don’t think TC cares weather he has $200 million or $500 million in RSU.  This is not about him and the management team but rather the millions of investors and stock holders of Apple.

         
  • Posted: 27 February 2012 09:37 PM #2

    Apple’s (AAPL) Board Now Needs to Listen to Warren Buffett About the Cash Hoard
    February 27, 2012 5:51 PM EST

    The focus on Apple’s (Nasdaq: AAPL) nearly $100 billion cash hoard is front and center. The company’s Board is currently carefully reviewing the massive stockpile, which CEO Tim Cooks admits is much more than the company needs to run effectively. Most traders are convinced the iPhone maker will pay a hefty dividend some time later in the year. However, if the Board looks to the past advice of the world’s greatest investor to the late Steve Jobs, something else might be in store for Apple investors…

    The Oracle of Omaha, Warren Buffett, reveled to CNBC viewers Monday morning about a conversation he had with Steve Jobs when the stock was still in the $200-range (likely 2010). At that time, Mr. Jobs reached out to Buffett and asked him what he thought the company should do with the cash.

    “It was an interesting conversation because I hadn’t talked to him in a long time,” Buffett said Monday in the CNBC interview. “He said, ‘We’ve got all this cash. What should we do with it?’ So we went over the alternatives. It was kind of interesting.”

    Since there are just four things management can do with the cash—stock buybacks, dividends, acquisitions, or sit on it—“I went through the logic of each thing,” Buffett said.

    Jobs told Buffett at that time Apple would not have the chance to make big acquisitions which would require lots of money. Buffett then asked him the question. “I would use it for buybacks if I thought my stock was undervalued… How do you feel about that?” At that, Jobs admitted he felt the stock was “very undervalued.”

    Mr. Jobs of course did nothing with the advice, which Mr. Buffett says is because “he didn’t want to do anything… he just liked having the cash.”

    Despite its huge run-up, investors still can argue Apple shares are cheap. Will the board take Mr. Buffett’s advice now, skip the dividend and initiate a buyback? They should.

    http://www.streetinsider.com/Dividends/Apples+(AAPL)+Board+Now+Needs+to+Listen+to+Warren+Buffett+About+the+Cash+Hoard/7218243.html?si_nl_click=2012022720-1308

         
  • Posted: 27 February 2012 09:46 PM #3

    I hope they follow Buffets advice.  Berkshire doesn’t offer a dividend and they are a much slower moving stock.

         
  • Posted: 28 February 2012 03:43 PM #4

    A buyback is the worst thing that Apple can do with their money.

    Yes, AAPL is undervalued.  But a buyback will not fix that.  It will artificially and temporarily raise the stock price while Apple is buying back stock but once they stop, the price will fall back down to undervalued levels.

    AAPL is undervalued because most investors believe that Apple’s success is mostly due to sheer luck and that eventually their luck will run out.  A buyback won’t change this perception.  The only thing that can change this perception is Apple’s continued success so that people who doubt Apple’s staying power are finally convinced that Apple knows what they’re doing and they’re pretty good at it and they can keep doing it for the foreseeable future.

    Furthermore, a buyback rewards the stockholders who have the least faith in Apple, have the shortest investing horizons, or both.  I don’t think Apple wants to attract this type of shareholder because that would only increase AAPL volatility.

    At least a dividend is awarded to all investors.  It doesn’t allow those with little faith in Apple to dump their stock and get rewarded with a windfall for displaying their lack of faith.  And those of us who have faith in Apple’s long term prospects aren’t left holding the bag owning still undervalued stock in a company that now has substantially less cash holdings.

    [ Edited: 28 February 2012 03:53 PM by aardman ]      
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    Posted: 28 February 2012 04:45 PM #5

    aardman - 28 February 2012 07:43 PM

    A buyback is the worst thing that Apple can do with their money.

    Yes, AAPL is undervalued.  But a buyback will not fix that.  It will artificially and temporarily raise the stock price while Apple is buying back stock but once they stop, the price will fall back down to undervalued levels.

    AAPL is undervalued because most investors believe that Apple’s success is mostly due to sheer luck and that eventually their luck will run out.  A buyback won’t change this perception.  The only thing that can change this perception is Apple’s continued success so that people who doubt Apple’s staying power are finally convinced that Apple knows what they’re doing and they’re pretty good at it and they can keep doing it for the foreseeable future.

    Furthermore, a buyback rewards the stockholders who have the least faith in Apple, have the shortest investing horizons, or both.  I don’t think Apple wants to attract this type of shareholder because that would only increase AAPL volatility.

    At least a dividend is awarded to all investors.  It doesn’t allow those with little faith in Apple to dump their stock and get rewarded with a windfall for displaying their lack of faith.  And those of us who have faith in Apple’s long term prospects aren’t left holding the bag owning still undervalued stock in a company that now has substantially less cash holdings.

    Of similar sentiments.  Prefer dividends from 2015 but earlier is acceptable but please no buyback, no splits and no one-time dividend payout.

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    Posted: 28 February 2012 04:47 PM #6

    Mace, were you objecting much the last 3 times Apple had a stock split? wink

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    Posted: 28 February 2012 04:51 PM #7

    Mav - 28 February 2012 08:47 PM

    Mace, were you objecting much the last 3 times Apple had a stock split? wink

    After noting what happen to AAPL post-split, I object to splitting.  It always decline for a long time after split.

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  • Posted: 28 February 2012 05:08 PM #8

    aardman - 28 February 2012 07:43 PM

    A buyback is the worst thing that Apple can do with their money.

    Yes, AAPL is undervalued.  But a buyback will not fix that.  It will artificially and temporarily raise the stock price while Apple is buying back stock but once they stop, the price will fall back down to undervalued levels.

    AAPL is undervalued because most investors believe that Apple’s success is mostly due to sheer luck and that eventually their luck will run out.  A buyback won’t change this perception.  The only thing that can change this perception is Apple’s continued success so that people who doubt Apple’s staying power are finally convinced that Apple knows what they’re doing and they’re pretty good at it and they can keep doing it for the foreseeable future.

    Furthermore, a buyback rewards the stockholders who have the least faith in Apple, have the shortest investing horizons, or both.  I don’t think Apple wants to attract this type of shareholder because that would only increase AAPL volatility.

    At least a dividend is awarded to all investors.  It doesn’t allow those with little faith in Apple to dump their stock and get rewarded with a windfall for displaying their lack of faith.  And those of us who have faith in Apple’s long term prospects aren’t left holding the bag owning still undervalued stock in a company that now has substantially less cash holdings.

    Could not disagree more. Buyback is the only thing I want to see happen. Hell, I don’t even care if they do it. I just want them to approve a really big one. It will keep the hedgies from pushing it down too much.

         
  • Posted: 28 February 2012 05:13 PM #9

    I guess I’m not following why a buy back wouldn’t be the best for shareholders.  A dividend is just gonna go to Uncle Sam.  A buy back will decrease the number of shares on the market, which then increases earnings per share.  An earnings per share increase will push the stock price if P/E ratios stay consistent.  I prefer buy back but could live with a small dividend.  smile

         
  • Posted: 28 February 2012 05:25 PM #10

    huskerrx - 28 February 2012 09:13 PM

    I guess I’m not following why a buy back wouldn’t be the best for shareholders.  A dividend is just gonna go to Uncle Sam.  A buy back will decrease the number of shares on the market, which then increases earnings per share.  An earnings per share increase will push the stock price if P/E ratios stay consistent.  I prefer buy back but could live with a small dividend.  smile

    +1

         
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    Posted: 28 February 2012 05:34 PM #11

    huskerrx - 28 February 2012 09:13 PM

    I guess I’m not following why a buy back wouldn’t be the best for shareholders.  A dividend is just gonna go to Uncle Sam.  A buy back will decrease the number of shares on the market, which then increases earnings per share.  An earnings per share increase will push the stock price if P/E ratios stay consistent.  I prefer buy back but could live with a small dividend.  smile

    Please read the post by aardman again.  Buy back is damn good for shareholders and Apple badges, the beef is not with this.  Wanting Apple to announce a big buy back plan and don’t execute is of similar vein to don’t want a buy back plan.

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    Posted: 28 February 2012 05:38 PM #12

    aardman - 28 February 2012 07:43 PM

    ... a buyback rewards the stockholders who have the least faith in Apple, have the shortest investing horizons, or both.  I don’t think Apple wants to attract this type of shareholder because that would only increase AAPL volatility ...

    Cut n paste relevant para from aardman for those who miss what his beef is about.  I would vote with all limbs, tongue, hairs, etc for a buy back if I’m a trader.

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  • Posted: 28 February 2012 05:40 PM #13

    Mace - 28 February 2012 09:34 PM
    huskerrx - 28 February 2012 09:13 PM

    I guess I’m not following why a buy back wouldn’t be the best for shareholders.  A dividend is just gonna go to Uncle Sam.  A buy back will decrease the number of shares on the market, which then increases earnings per share.  An earnings per share increase will push the stock price if P/E ratios stay consistent.  I prefer buy back but could live with a small dividend.  smile

    Please read the post by aardman again.  Buy back is damn good for shareholders and Apple badges, the beef is not with this.  Wanting Apple to announce a big buy back plan and don’t execute is of similar vein to don’t want a buy back plan.

    If apple announced a buy back, I would hope the stock is bought at the lowest price possible.  The more stock they buy with a predetermined amount will increase my share value.  So to announce and save the actual buy back action for a rainy day is fine with me.

         
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    Posted: 28 February 2012 06:01 PM #14

    I’m in the pro-buyback camp.

    If apple bought back 10% of shares, the EPS is going to increase by 10%.

    Anyone that thinks this isn’t going to cause a roughly equivilent lift in share price needs to provide a good argument as to why not.

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  • Posted: 28 February 2012 06:10 PM #15

    Burgess - 28 February 2012 10:01 PM

    I’m in the pro-buyback camp.

    If apple bought back 10% of shares, the EPS is going to increase by 10%.

    Anyone that thinks this isn’t going to cause a roughly equivilent lift in share price needs to provide a good argument as to why not.

    I think EPS would actually go up higher than the buyback percentage.  A 10% buyback would equate to a 11.1% (roughly smile ) EPS increase.