Hoping Carl Icahn Pulls This Off ($AAPL)

By: ispeculatornew
Date posted: 10.03.2013 (3:00 am) | Write a Comment  (2 Comments)

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$AAPLI’m a big believer in Apple. In its current products, its management team, the possibility of future products. It makes tons of profits, continues to show strong growth in revenues and profits. Best of all, I continue to think its price is very reasonable and its P/E ratio is among the more attractive ones out there. So of course, I did take a longer term position and have done very well with it (stock is up over 25% from that point). Owning Apple isn’t as “cool” as it was a year or two ago but that is when more contrarian investors, activist investors jump in which is exactly what Carl Icahn ended up doing. He strongly believes in Apple’s value and is very involved in trying to help Apple reach that point. The one thing that would unlock value is for Apple to put its incredible stack of cash to work. How? A big dividend is interesting and would help the case of Apple as a core dividend play but I do agree that a stock buyback is much more interesting. Decrease the number of shares outstanding to increase the value of the existing shares (in terms of the price, revenues/share and EPS). I could hold on to my shares for a couple of decades without paying any taxes.

It’s interesting how Mr. Icahn has been tweating about his progress… He’s certainly getting his point across. How many shares does one need to own to have coffee with Apple’s CEO, Tim Cook? Based on CharityBuzz, that number is staggering… like $610,000 🙂

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Disclaimer: Long Apple (AAPL)

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2 Comments

  1. Comment by Nate — October 3, 2013 @ 12:53 pm

    I’d like to know what your take on Henry Blodget’s reaction to Carl Icahn’s involvement: “As a fellow Apple shareholder, I think Apple should tell Carl Icahn to stuff it”.

    His criticism is basically that Icahn’s motivations are short term — he just wants a bump in the stock price so he can sell out his position — and not necessarily in the long term interests of the company or long term shareholders.

    “If Apple did borrow ~$150 billion to buy back its own stock, meanwhile (it would have to borrow this money, because most of its own cash is located overseas and it can’t use it to buy back stock without paying huge taxes), then Carl Icahn would just dump it and move on.

    Then Apple’s actual investors, like me, would be left with a company with a mountain of debt and less cash and flexibility during a challenging period for the industry and company.”

    Blodget thinks that while the dividend should be increased, Apple’s management needs to continue to focus on product innovation and execution rather than on ‘financial engineering’ to satisfy short term investors.

    [google ‘Blodget Carl Icahn Apple’ to view the CNBC segment]

  2. Comment by IS — October 6, 2013 @ 3:15 pm

    @Nate – Appreciate the question. It’s always difficult for me to judge Blodget on his Apple commentary. He knows a tremendous amount about the company and certainly knows how to judge it. On the other hand though, he’s often more interested in getting the big headlines and contrarian opinion that will get him on tv. Can’t blame the guy, it helps his business a great deal.

    I do agree that the amount of the buyback seems large and I don’t see the point in going so “big”. But it does seem like the best way to return money so until I hear Blodget come up with a better strategy for Apple to use its cash, I’d side with Icahn.

    What do you think?

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