Tag: Buffet

Apple Is Not a Tech Company Anymore

2 min read

by Gorica Gligorijevic

The logic behind is: If Apple is high-tech Warren Buffett wouldn’t invest. Since he or his Barclay Hathaway is the major investor in the iPhone and Apple is producing iPhones for the customers, Apple is a consumer products company. Period!

I’m not a postman. I’m a post-delivery specialist.

If Tim Cook, the Apple chief executive, needs some mantra to keep going, it’s okay.

To keep going what? Cook is on his way to persuade Wall Street in that.

Apple has to solve that puzzle. It is or it isn’t a high-tech company.

“We believe that technology should be in the background, not the foreground, and that technology should empower people to do things and help them do things they couldn’t do otherwise,” said Cook, after Berkshire shareholders meeting in Omaha, Nebraska.

So, Apple has been absorbed into the Silicon Valley swamp, without its willingness. C’mon!

Well, when Cook was asked by CNBC about Warren Buffett’s rising investment in Apple, Cook shot the Silicon Valley.

Tim Cook, Apple CEO

He said: “(Buffett) has been very clear. He didn’t invest in technology companies and companies he didn’t understand.

He’s been totally clear with that. And so he obviously views Apple as a consumer company.”

He should bite his lip.

Because we all know the old proverb: At the end of the day, money talks.

It’s not rocket science to find what really is hiding behind these words.

Put the logic aside, but the statement is right.

It looks the Apple is in hot water.

Let the cat out of the bag.

It isn’t a secret that many companies cannot meet the new EU legislation (GDPR) to guard individual privacy. Or they are struggling with them.

Big tech companies are under attack. The regulators in the EU demand severe new legislation to protect privacy.

That crashed tech’s attempts to use the user data in a dishonest way.

They have to create new business standards.

The General Data Protection Regulation became law everywhere in the EU last year. It means every company is obliged to receive permission before gathering any data online.

Cook adored the new EU regulation last year. He has been one of the most vociferous proponents of new regulations. It isn’t a wonder.

“We’re in the tech industry,” Cook admitted. “But we work at that intersection of technology and the liberal arts and the humanities. And so we make products for people, and so the consumer’s at the center of what we do.”

Facebook and its users have a major influence on Cupertino.

Facebook is at the end of iPhones software.

Apple gets practically all of its earnings by selling iPhones. They are developing the hardware in Cupertino and write the codes. But Facebook’s apps Instagram, Messenger, and WhatsApp are the most popular iOS downloads. So, Facebook is entered on the software end.

The Wall Street Journal published the social media titan is in communications with Mastercard, Visa, and First Data Corp.

What is it all about?

It is all about a payments system. The aim is to modify Facebook features into a living ecosystem.

So, what one could ask?

This arrangement could make physical hardware trivial.

Apple needs to shift its business from hardware to software in order to satisfy investors.

At first place Buffett.

They have to venture other market forms and rebrand.

But still, as it matches even more engaged inside our gadgets, can Apple honestly pretend to be anything else than a high-tech company?

Despite this strange high-heavy separation, Cook has to persuade Wall Street that Apple is remodeled.

The iPhone is a high margin sales. And it is a low margin business.

If Cook manages to rebrand Apple as a consumer products company, the prizes would be amazingly large.

Apple shares trade at a 17.47 multiple of trailing earnings. The P/E ratio is 20.07.

Best consumer products companies like Procter & Gamble and Colgate Palmolive get multiples closer to 25. If Apple traded at an alike P/E the stock would bring $296.

For now, Apple is a puzzle. It is a famous franchise.

We all love their goods. But we have to say, the iPhone isn’t growth.

People love Apple products. But the iPhone is no longer a growth industry, because, at the same time, we want fresh gadgets. And cheaper too.

Moreover, we think even if Apple stays as high-tech company Warren Buffett will not step out.

risk disclosure

14th May 2019
What is Growth Investing and How To Pick a Stock?
Here is how to recognize the best growth investment stocks and how to execute this investment strategy

By Guy Avtalyon

Growth investing is an investment strategy which investors use to find stocks with higher earnings growth prospects. It doesn’t matter how high their prices are. These stocks usually have low dividend yields. Also, they have higher volatility and limited downside protection. Moreover, they are highly sensitive to changes in interest rates. The companies with stocks that trade at high valuation levels usually have a high P/E ratio, high P/B, and P/S ratio.

Growth investing is focused on capital appreciation. Growth investors invest only in companies that have above-median growth. Even if the stock price looks expensive and metrics like price-to-earnings or price-to-book ratios, confirm that. The growth investing strategy is in contrast with value investing.

This investing strategy’s focus is on a company that has a track record of high or rising growth. For example, a company has a stock price that has rise year after year over 3 or 4 years. Such stock is a target of growth investors. But the timeline shouldn’t be so long. Even if a stock rise at price every week for 3 weeks in a row growth investors will be interested in that stock.

Growth investing doesn’t consider direct research or fundamentals only. Very often it may be a response to the market sentiment.

For example, if you drive BMW and your friends also drive a BMW car. And say, the stock has gone up every month for the last six months. Then you know that the overall market sentiment is good. And the sentiment of the consumers is also a good and valuable metric for growth investors.

So, you would buy BMW stock if you support the growth investing viewpoint.

Who are growth investors?

Some famous investors such as Warren Buffett have stated that there is no theoretical difference between the concepts of value and growth (“Growth and Value Investing are joined at the hip”).

That’s because the growth is always a component in the calculation of value. It is constituting a variable whose importance can range from a little too vast. And whose impact can be both negative as well as positive?

Buffet’s opinion in one sentence is: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price”.

But the real father of growth investing is Thomas Rowe Price, Jr. who worked and promoted growth investing through his company T. Rowe Price. He founded this company in 1937 and today is a publicly-traded multinational investment firm.

How to execute a growth investment strategy?

The following businesses are suitable for growth investing:
- Emerging markets
- Recovery shares
- Blue chips
- Internet and technology stock
- Smaller companies
- Special Situations
What is the main issue with growth investing? It is the fear you are buying at the top of the growth curve. One way to avoid this is to look for long-term growth patterns.

Don’t look at growth surges that last one week, or one month or several months. If you really found a solid company, it should have a history of solid growth. And be able to demonstrate an upward trend in their share price over many years.

But, Most investors do not relly on growth investing alone. They look at other indicators that can support a pattern for future growth. Let’s take the BMW as an example again.

If they are bringing out new lines of the car, expanding to different countries then it is clear that BMW is targeting growth as a strategy for the company. So, you may own a good stock if you are using a growth investing strategy.
This strategy is most effective in the long run. It isn’t suitable for short-term investors for obvious reasons. Growth companies need time to grow.
Every investor should ask this question: Why is growth investing?
The possible answer could be because you want a long-term financial stability and wealth accumulation. And you’ll be right.

How to identify stocks for growth investing?

Growth investment involves picking essentially strong stocks. These stocks have a promising future compared to other stocks in their sector and will have an edge in terms of returns in the long-term. While choosing stock for growth investing, it is important to ensure some essential factors such as the revenue model, cash inflow, growth prospects with respect to the economy, the company’s executive board, market, competition, etc. Researching would let you know if a stock suits the growth investing strategy or not. It is easy to get an insight when you study the company’s balance sheets and reading up more about its history, endeavors, and goals from its website or some other sources. Before taking the final call on your growth investment, it is very important to ensure whether the asset fits the criteria of optimal returns.

Here are a few parameters that could be helpful in analyzing whether a stock is a growth stock or not:

Return on Equity: This means the profit-making potential of the company. It is calculated by dividing the net income of the company with the total equity of the shareholders.

Increase in Earning per Share (EPS): An increased EPS ensures better growth prospects. Hence, it is very important for you to analyze if the EPS is increasing or not over the observed time.

Projected Earnings: It gives an insight into the company’s expected growth and can act as a good indicator of growth investment.

What are the picks for growth investing?

Small-Cap Stocks: Companies that lie in the suit of small-cap are those that are in their initial growth stages. This makes them more promising in growth prospects, the affordability of the stocks is higher. This enables you to buy a bigger lot of their shares and make a decent investment.

Technology and Healthcare Stocks: These companies could be a good pick for growth investing. They are a kind of revolutionary innovations, which increases the scope of their growth prospects. The fact they are exceptionally well in the market because they target a wider audience, thus resulting in exponential growth. They stand by the characteristics of growth in the investment.

Speculative Investments: Even speculative stocks could bring in a fortune in terms of growth investing as they come at a higher risk. If you are choosing a speculative investment, make sure to practice caution and invest only your surplus funds with due diligence.

The great influence in shaping this investment style had Phil Fisher, whose 1958 book “Common Stocks and Uncommon Profits” is still today a reference for identifying growth companies and we highly recommend this book.
24th September 2018