This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

I'm Holding Apple Under $400 (and I'm so Ashamed)

Stocks in this article: AAPL MSFT DELL IBM TXN

There was a point, however, when I agreed with CEO Tim Cook in his opposition to David Einhorn's iPrefs. But I've become convinced that aside from better innovation, iPrefs is Apple's best route to get out of this rut. The Street is unimpressed with $137 billion in cash and no debts. This is what the P/E of 9 presumes. The stock is being punished because the market is discounting the future value of the cash.

Does IBM (IBM) deserve a higher P/E than Apple? How about a company like Texas Instruments (TXN), which has 43% more debt than it does cash. But Apple has no debt. Meanwhile, IBM has $33 billion in debt and only $11 billion in cash. Remarkably, both of these companies are percentage points away from their 52-week highs, while Apple has now lost more than 40% since reaching $705.

The market is willing to forgive IBM's highly levered balance sheet because the company is seen as more "shareholder-friendly." It also helps that IBM boasts 85% return on equity.

But that doesn't explain why Microsoft, which has 22% ROE, deserves a higher P/E than Apple. In this situation, Apple's cash is actually hurting the stock. And if Apple does not feel that $400 per share is cheap enough to buy-back its own shares, then why the heck am I still holding?


The direction of the company is no longer clear. Today, not only is Apple's lack of innovation a legitimate concern, I don't think Tim Cook is running as tight a ship as he can. While I do believe he's a good manager, Apple has been apologizing way too much.

While this company is without a doubt still very profitable and well established, Apple is no longer executing as flawlessly as the Street expects.

While I once defended the company with undying loyalty. It's no longer clear, however, that the company feels the same way about its shareholders, given the stubborn silence regarding its cash.

I can say with great conviction that Apple's decline is temporary, but I take no solace in the fact that all of this shame could have been avoided had the company listened to David Einhorn. With second-quarter earnings coming up next week, I've got my hand out for an increase in the dividend, and there's no shame in that.

At the time of publication the author had a position in AAPL.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Richard Saintvilus is a private investor with an information technology and engineering background and the founder and producer of the investor Web site Saint's Sense. He has been investing and trading for over 15 years. He employs conservative strategies in assessing equities and appraising value while minimizing downside risk. His decisions are based in part on management, growth prospects, return on equity and price-to-earnings as well as macroeconomic factors. He is an investor who seeks opportunities whether on the long or short side and believes in changing positions as information changes.
2 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs