AAPL and Apple

Tech
889

After realizing FA is historical analysis, no longer bother about it. You should ask @Jil, WB and professor Aswath Damodaran. I’ve returned what I learn in colleges.

Aswath understood the Apple cycle and AAPL investors pretty well, and has been trading AAPL profitably.

He wrote three articles on AAPL and AMZN.
Apple And Amazon At A Trillion Dollar: Looking Back And Looking Forward

Amazon And Apple At A Trillion Dollar: A Follow-Up On Uncertainty And Catalysts

Investing Whiplash: Looking For Closure With Apple And Amazon

Can’t find any newer article, probably thought AAPL is a goner after the big miss, and miss the huge run,

890

Did you learn that revenue and income growth don’t matter? :thinking:

891

Completely forgotten what I have learned. From kung fu, I learned,

无招胜有招
唯快不破

and the biggest lesson I have learned about stock market is,

a

892

Day trading? :scream:

893

Nimble.

Btw, I follow Jim Cramer, “own not trade AAPL”.

I am interested to know what Aswath did with his latest AAPL purchase@$175.

He shorted at $230, covered at $205, bought @$175, price declined to $140, did he panic sell? Or blindly hold? till?

894

This is wrong.

FA is using DCF analysis and that is to identify future growth potential for next 20 years ( or 10 years ) and bring all the futures returns to current amount using a discount rate. This amount is equal to current price of the stock.

For example: AAPL has EPS=11.85 this year ttm and likely eps growth 9.86% every year ( finviz 5y eps growth) and has beta = 1.23. If we use these and make a DCF it shows $259.6. (This is my own simple DCF calculator).

DCF is always conservative.

Now, if the current price is higher than DCF price, people are paying extra premium. If lt is lower than DCF, it is attractive to buy the stock.

This is the main reason stock price changes after every quarterly results as people use computer systems to recalculate DCF based on results and decide to sell or buy the stocks.

The issue is if aapl grows at 9.86% every year, it is fine!

The master of the DCF subject ( stock valuation) is Aswath as he is the professor teaching the subject for 20+ years.

FYI: He still holds AAPL and AMZN as an investor.

895

Heard of GIGO? Can one reliably predict discount rate and cash flows for 20 years? Ask Aswath. He is professor in this topic.

Even he said “It is better to be lucky than skilled”.

What do you think he did?

Did you read my other links? Is all about Aswath trampoline acts.

@manch and @Jil when you guys talk so enthusiastically about DCF and valuation, it tells me that you have new toilet bowl smells good feeling just like when Aswath and me initially learned about them, soon we realize “it is better to be lucky than skilled”, until then enjoy the new toilet bowl :grinning: and be careful with those axes :stuck_out_tongue_winking_eye:

Btw, get ready your cash to buy AAPL @$280 (aggressive), $270 (conservative) or $260 (if you’re lucky) :stuck_out_tongue:

896

You are one of the luckiest to buy and hold AAPL, but that came accidentally not by methodically!

Here is the issue:

If bank A gives 3.25% for 30 fixed and bank B gives 3.75% for 30 fixed, keeping all others terms equal, which one will you pick?

The answer is obvious 3.25%, but DCF proves that by choosing 3.25, the borrower gets benefited and how much.

Whether you think this as toilet smell or think this as quantitative valuation, i will leave it to you.

BTW: I may not continue this thread any further. Just stepped in to tell your assumption for FA is totally wrong. Whether to take it or leave it, I will leave it to you.

897

Friend, we are talking about the use of valuation specifically DCF to predict the price behavior of stocks, not about the usefulness of valuation in corporate finance.

898

I just gave that sample as this real estate blog and easy for everyone to understand. DCF not only applied for stocks alone, but can be used any where.

Valuation is a big subject and it is exactly like appraisal of a home, DCF is simple concept to value a stock.

Using a consensus ( multiple analysts ) future EPS growth, existing beta, using DCF will show whether a company is overvalued or undervalued. Since no one can really predict the future, we take from consensus analyst prediction, that is based on quarterly results and subsequent conference call Q&A.

This is the basic of fundamental analysis. I do not want to go deep further as this is big subject, but essential subject for long term investment.

Bye now.

899

Friend, FA is for value investing where you can reasonably guess with some degree of accuracy the stream of cash flows, and not growth investing where your guess of cashflows is essentially GIGO. AAPL price behavior swing wider than Aswath’s value investing’s range. As I mentioned moons ago, WB has wise up and has leaned towards growth mentality i.e. move towards Fisher style away from Graham. I think you should too :slight_smile:

AAPL is more a value stock than a growth stock i.e. value with a small component of growth, yet Aswath couldn’t get the valuation range right.

900

I try to avoid updates here as I feel that I may be wasting my time esp during holidays. I am programming and programming endlessly until I get the depth of the subject. I am unable to update here as I am alone programming (not sharing with any one).

FA is backbone of any investment, be it real estate or stocks.

Various degrees of assessment happens like no two appraisal brings the same value. Similarly, aswath or fisher or graham or buffet may vary on their assessment. They use the similar tool what big banks or hedge funds are using.

Again, fundamental analysis is too big subject and essential for any long term investment.

Here is my last update about FA and TA:

For me, both TA and FA work and benefit overall. They both use past data to analyze future potential. One uses earnings and profitably trends and the other uses price trends. TA in its simplest form looks at patterns in past stock price movements to predict future price movements.

Two sides of the same investment coin, buy low and sell high. TA is a short term (swing trading) outlook while FA is long term (investing) outlook.

TA doesn’t work while big market makers forces driving share prices (UP or DOWN) using algorithms, esp during the last 30 days of 2018 (down swing) and 2019 (up swing).

FA, works Over a longer time frame, is generally a result of new public information about a company being released, e.g. a company beating earnings expectation over the year and increasing its stock price by an amount relative to the earnings beat. DCF analysis one of the best to guide us future growth.

When you look at stock price movements to determine stock price movements, you’re not looking at the underlying cause of those movements and what actually moves the stock price in the first place.

The accurate way to predict future stock price movements is to predict the new public information being released that will influence the stock price (i.e. the cause). This is why fundamental analysis works.

Markets are probabilistic in nature, and it is more about knowing the probability distribution of future price movement, rather than trying to define a deterministic function and make concrete predictions.

I used to monitor 580 stocks (while I focus my core 100 stocks) using my own proprietary algorithms. By using my own algorithms (TA and FA combined) I see my gain is increased.

Good Luck and Happy new year to you all

901

Just let it go :joy: and enjoy the holidays

1 Like
902

Look like I have wasted my time :sob: still stick dogmatically to this wrong idea :exploding_head:

Why is Aswath using FA to trade?

Don’t use personal experience, is good only for talking to liberals or people who are swayed by emotions. Why do @wuqijun invest in TSLA? Elon Musk, not FA or TA :flushed:

903

You have to ask him, not me !

You have to ask him, not me !

904

@Jil Using FA + TA is a long term or short term outlook?

This is the exact behavior that TA is able to detect. What book did you read that say otherwise?

Btw, the reason for bringing up Elon Musk and Tesla is to illustrate that fundamentals can be changed by people and hence FA especially those using financial numbers, is too focussed on the past and ended up extrapolating the past and not assessing the future using the past. Btw, I am sensing that you’re defining FA so broad that it literally means any analysis that is not TA. The narrow definition of FA is essentially financial analysis. The narrow definition of TA is analysis based on share price. Analyzing news flow, sentiments, leadership, business models, … can be lumped into either camp or as an individual category depending on your definition. I mostly use the narrow definition of FA.

905

I know you know the answers, did not like to go lengthy conversation/discussion.

FA so broad that it literally means any analysis that is not TA.

Yes, management review, moat, sector growth…etc involved in FA. Finally, it comes to DCF analysis (Part of FA) to find future values. The DCF is quantitively valuation company exactly like appraisal value (even though appraisal runs through 25-35 pages, we just ask what is the final value). This is what driving the price for long term.

TA is just a fluctuation over the median value of the price line.

906

Wise :wink:

With that definition, FA is important :stuck_out_tongue:

Unfortunately using that formula, it changes almost daily.

Interesting. My view is share price is an indicator of the collective view of investors and traders of the value of the stock at any one time. Hence TA is an observation how that view changes through time. Using simple trend lines and EW, we can try to guess the possible future values.

907

You are again pulling my mouth instead of doing research ! Okay, here you go.

DCF does not change daily, like an appraisal (stock=valuation) for an appraiser (stock=Analyst), except after quarterly earnings or any special events happened (say Trump removed all tariffs).

I will leave it you to research why it is constant !

Daily price is changing, not constant, as different investors are ready to pay premium to buy that stock. just like bidding for Palo Alto home where winner buyer is ready to pay $50k or $100k over the max bid others are giving ! This is called equity risk premium which changes person to person, fund to fund, country to country.

When everyone is scared, AAPL came down to $142 (undervalued) and everyone is exuberant it comes to $292

BTW: Entire valuation is beyond my scope. Better to go through Aswath blog/videos (very conservative valuation like bank refinance appraisal).

908