Some people may want to lock in profits, and some big institutional investors may be to forced to sell, due to the AAPL position in their portfolio becoming too large.

I say do it. You will learn much from your mentors, more from your books, and most from your mistakes.

Not to say it will be a mistake, because no one really knows where the Apple stock price is headed- not even Tim Cook- who has the most amount of information.

Life is short, take a chance!

Steve Jobs said
"Life can be much broader once you discover one simple fact: Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use."

Subscribed to see where this thread (and AAPL) goes over the course of the year.

They need the cash to serve margin calls on their leveraged long Zynga positions 'cause that baby's gonna take off soon™?

Seriously, there are so many reasons good, bad or just irrelevant. So let Sklansky go first.

Haven't read any of the thread yet but buy, buy, buy.

Is this a joke?

His MM is paying .01%. You really think it's possible that the 1 yr discount rate for aapl is less? The current price theoretically includes price expectations for a year from now and if the stock was expected to be $670 a year from now, it would be less now. Are you trolling? Or just in need of an econ 101 class?

Who is that chick in your avatar?

How does a discount rate have ANYTHING to do with my question hahaha? Also how would apples cost of capital be the metric you used to compare the return of a money market security? (which btw is closer to 1.2% than 0.1%, that's called compounded interest, the rate he listed was likely monthly I'm too lazy to look back now).

EV calculations generally don't include paragraphs of irrelevant and personal (lol) attacks. But sure, I'd love to hear your Econ 101 theory.

Seriously, instead of going on a diatribe about my Econ education, just draw up a simple EV equation that describes the AAPL scenario. Maybe you can help me understand how you're coming up with these wild assumptions.

Wild assumptions that the EV of Aapl is greater than .01 or 1.2%?

Diatribe? Really? I made one sentence saying you might be in need of Econ101. I made no personal attacks. I was honestly curious if you are trolling.

The price of Aapl takes into account its inherent risks and expected profits.

I'm still not convinced that you are serious but you might want to look at how stocks are priced. They are based on expectations of the future of the company. There must be a reward to inherent risk which is why stocks have a better payoff than MMs.

Kate Upton

that was the time when Apple " developed " a new industry, but now and in the future apple have competition.

1. 60% margin will not hold forever

2. The iphone is not the best phone at the moment but have the best brandname

3. Apple nearly use 30% samsung parts and they blame them to not copy there products......but they need samsung.

Apple might run for this year and maybee next one, but over a longer timeframe the margin will collapse to 20-30% or even lower.

You are not getting my point. My only conclusion is that it is ridiculous to assert that a piece of paper obviously will be worth an average of $850 in a year if so many wealthy/expert investors are willling to sell or not buy at $670 (As opposed to lets say $820). That might occasionally occur when only a few people are aware of the factors regarding its worth. But that's clearly not the case here.

Mburke - I think he is saying that Apple's EV is exactly its discount rate, which factors in its riskiness. Assuming the stock is efficient, as many itt claim it to be. Whether that EV is worth it depends on the risk aversion of the OP.

wait what.

if apple's discount rate is exactly it's IRR. than the NPV of apple is zero. whereas the discount rate for a money market account might be 0.75%-approaching zero, in which case the MM security would have a positive NPV. on its most simplistic level not even taking into account the benefits of hedging or diversifying your risk to maintain lower volatility, mm would be > apple.

i don't think you guys are getting that costs of capital get adjusted for risk biases.

moreover, my issue was that he wasn't even attempting to articulate some of the numerical bases for his assumptions. ie, why apples ev would be "always >=1.2". let alone to just draw the simple equation up.

let's say (because i guess maybe he doesn't get it), op's risk profile is somewhat aggressive. let's say that in that scenario his demanded return is 10% YOY on a "risky" asset (defining risky as relative to OPs allocation, because i don't think OP really understands the risk involved with buying a single security). what kind of valuation can you guys come up with such that it out values a guaranteed 1.2% return. and if you do what assumptions/forecasts are you basing them off of.

all i'm asking for is a little light-shed on the #s youre coming up w/. the burden of proof in this case is to prove that apple is greater than EV(mm) = 1.0*1.2. until then, everything you're saying is hard to credit.

How about just CAPM? In a market efficient world, expected return is proportional to risk. Its pretty easy to see that Apple is riskier than a money-market, thus its expected return is higher. Note that this risk is measured as beta, which is only systematic risk. Since OP is only investing in one stock (horrible decision obv), he will encounter diversifiable risk as well, but that is beside the point.

These are reasons to sell stocks with 850 EV for 830. Not 670. I can't believe that everybody is not agreeing with me that the OP is being silly if he really thinks that the general consensus of experts is that AAPL is worth 850.

Count me in for agreement there.

capm is just used to derive the cost of equity. so let's say we value aapl using capm to get our coe (i think this is a cool idea and would be fun for this thread to help op).

what are your underlying assumptions? what are you using as the rf (10y, 30y, why?)?

you'd need things like the beta and how/why you derived that beta. a decent and verifiable pricing strategy, etc. in addition we'd need to have some sort of consensus (and hopefully cogent) return for the peer market.

but our market isn't efficient. if our market was efficient, trading would not be a profession. nor would active management. people would instead speculate on systemic risk solely using indexes because there would not be individual security risk.

second, the whole reason people create models is because exactly what you just said is very often not true. it's the reason that people take bets like CDS on JGBs or treasuries.

often times because of a variety of reasons (biases, bubbles, liquidity issues, systemic or cyclical problems) those spreads can widen. and as somebody mentioned before like was the case in the housing bubble, or the similar real estate based bubble in japan a few decades ago, or with the real estate crisis in florida in the early 1900s, or with tulips in 15th century europe.

while this might be implicitly true. you should be able to prove this. why is a money market less risky than aapl? mathematically how would you model that?

like i said earlier. many times the price of an asset can become dislodged with its return. and this goes both ways. thats the whole point of having undervalued and overrvalued securities. (i'm not saying that AAPL is one way or the other, i'm only an advocate for the methodology behind finding that accurate price before making any assumption, especially if that assumption reflects your entire portfolio.)

beta is a measure of volatility, NOT, risk. beta is a component OF risk, but it certainly is not the only consideration.

risk is measured by volatility * the premium (which is given by the spread between the return for the market and the risk free rate, neither of which were discussed so far but both of which are important considerations)

agree that it's a horrible decision, which is why i suggested mitigating that diversifiable risk with an aggressive blended strategy. or, if he were to not, to make sure to very thoroughly value the two scenarios of cash and AAPL.

I am convinced mburke.

Shorting aapl next week.

.

Yeah you do for all of this but it wont matter because the money market will ALWAYS come out with a lower result.

Agree market is efficient, I was referencing the point itt that if anything is to be efficient it is AAPL and it is very unlikely OP has an "edge" in the game

You would simply run a regression on variance, which as you say isn't 100% true risk but it is a pretty good proxy


You could make a DCF? I mean if you are going to argue that Apple has negative alpha because its future cash flows will be lower than what is priced into the stock, then that is fine. But I feel like you took a roundabout way of getting there which is why we had to go through this back-and-forth.

beta is not a measure of volatility. volatility is related to beta, but it certainly is not the only consideration.

you can have ~0 beta stocks that are extremely volatile.

beta simply tells you how much, on average, a stock is expected to move (or has moved historically in the case of historical beta) when the market moves.

if the stock moves up 2% on average for a market move of 1%, its beta is 2.
if the stock moves up 0.5% on average for a market move of 1%, its beta is 0.5.

some stocks, however, move up and down wildly with little regard to what the market is doing, and beta doesn't begin to describe their volatility.

OP is clearly a noob who has no idea what he is talking about or doing. We are on to higher level discussions here.

wtf are you talking about lol. that's exactly what beta is. a measure of volatility (variation in price). beta is just the movement relationship of an asset to a portfolio or a benchmark/market. the volatility is in reference to a market, so it isn't arbitrary as you seem to think.

i never said that a beta of 0 meant a stock wasn't volatile lol, i'm pretty sure anybody who understand beta understands the correlations for a security with a beta of -1, 0, and 1.

this is the definiton of volatility... lol

this is the definition of beta0... lol (most "volatile"). and beta perfectly describes their relationship: there is none. that's the whole point. market-neutral funds seeking alpha with no correlation to the market seek this obviously, so as to not be exposed to systemic risk at all.

volatility is just market or portfolio correlation with elasticity sensitivities, so yeah obviously the "volatility-ness" of a security is obviously inversely related to an increase in the absolute value of beta.

no it's not, volatility is just a measure of how "strongly" a market price has moved in a period of time.
beta is the normalized correlation to a market portfolio.