It was March 2013. The U.S. stock market was coming back strong from the great crisis, and the big bargains were disappearing as the market growth, but there was a big company that was definitely out of market favor and severely judged by investors, analysts and traders.
It was a company that changed the world but seemed in trouble because of the death of the founder and the lack of a major innovation since then.
I think you have already figured out the company name ... Apple (AAPL, Financial).
In March 2013 I bought a bunch of shares of AAPL at ~440-450 $ / share ( ~64 $ / share split adjusted). The risk: I'm not a technology expert, and I know how fast technology can mutate. A technology company going out of favor could go from greatness to quite bankrupt (Nokia, BlackBerry docet)
So ... was Apple the new BlackBerry?
My view
I'm not a technology expert, but I'm a curious guy who looks around trying to figure out what works and what doesn't. I found that Apple was different from any other PC/smartphone company. I found that Apple customers were and are different from other PC/smartphone company customers.
The difference
Looking around and talking with many Apple customers, I've found that Apple was more than a technology company. For the core of Apple customers, Apple is a strongly branded "lifestyle" status company .
The core Apple customers are not going to buy a smartphone, are directly going to buy an iPhone; are not going to buy a PC, but a Mac. To me, in this sense, it looks quite similar to Ferrari, Rolex and Hermes.
The core of Ferrari customers are simply going to buy a Ferrari , not a car , as the core of Hermes costumer are simply going to buy a birkin.
With that personal strategic confidence and safety in mind, I have started to look at the financial side.
Financial: cash is king
"Count what matters . So we count the cash." Bruce Berkowitz (Trades, Portfolio)
Looking at Apple's financial was Incredible ... UAU ... was that company producing smartphone or directly printing money?
In the 12 months ended Sept. 29, 2012, Apple made ~50 bln of operating cash flow and ~ 42 bln of free cash flow (~45 $ FCF / share at that time).
And as of December 2012 Apple had around 135 bln of net Cash (~ 145 $/share of that time)
I'm not sure the numbers are correct to the dollar, but it "is better to be roughly right than precisely wrong." So to keep a long story short, in my view, I was buying a strong world leader for 10 times FCF , and ~7 times FCF if you roughly subtract the net cash.
The period i looked wrong
After my purchase, the stock continued to go down (to a minimum of ~ 390 $/share), and my position lost for 5-6 months.
So what I have done? Nothing.
I still think my thesis was right so I simply have to stay the course.
Now I look right
The update of the core product (iphone 6), the launch of new one (Apple iWatch and Apple Pay) and the strong performance of the iTunes/software/services segment boosted by a strong return of cash to shareholders through both dividend and buyback have fueled the share price apprecciation.
So what I do now: Nothing.
I simply sit on my asset , reading the company report, the earnings release, the product development and collecting increasing dividends. As usual I'm in for the long run. I don't have any exit price. I will hold the position as long as my view of the company and the fundamentals don't significally change.
"Stretch your time horizon both for tax purposes and because there are not so many really great businesses." Tom Russo (Trades, Portfolio)
Snowballbuilder
Snowballbuilder.blogspot.it
Disclosure: Long aapl
