Apple Still Doesn’t Measure Up

Friday, September 13, 2013

In spite of Carl Icahn’s taking a large position in Apple (AAPL) and this week’s announcement of the new iPhone 5S and 5C, Apple continues to have an uncertain future. As a result, I believe it remains a poor investment. Here is the comment I posted in my previous article on Seeking Alpha:

Apple bulls–
Since writing this article (and selling AAPL at $455), the stock first rose to about $500 on Carl Icahn’s announcement, then vacillated around that level for the 3+ weeks leading up to this week’s iPhone 5C/5S release announcement. Now back to about $470, here is how I view the stock:

First, I dislike Icahn’s involvement with Apple. He has a long history as one of those quasi-investors whose primary goal is to milk a weak situation. Apple weak? Yes. Still down 1/3 from last year’s high with a weakened growth outlook, Apple’s primary asset to Icahn is that gigantic pile of cash. With much of it held overseas, he has the “clever” idea of Apple borrowing cash (to avoid the tax effect from bringing the cash back to the U.S.), then paying it to shareholders as well as buying back stock. The key point is that Icahn is not in AAPL because he sees a great long-term investment.

Second, the old strategy of buying Apple before product announcements is once again a losing proposition. There is an article talking about how wise Cook is in pushing development in the inner workings of the iPhone rather than Jobs’ approach of pushing for new products with design and flash. Wisdom or not, lack of new products continues and that is the route to lower growth with less profit margins.

Third, the decision is not whether to own Apple or not. Rather, it’s whether to commit assets to Apple’s stock rather than to other promising investments out there. In other words, Apple should be viewed as one of many investments, not as THE investment.

Hope this helps. Once again, I like Apple, the company, and the wonderful products it has created. As an investment, though, I think risk outweighs return, particularly when there so many other interesting stocks available.
John Tobey

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John Tobey on Seeking Alpha

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September 2013