[OC] Apple’s cash flow statement visualizedSubmitted by giteam t3_zyxclj in dataisbeautiful
chouseva t1_j28mwz5 wrote
Reply to comment by Yeti-420-69 in [OC] Apple’s cash flow statement visualized by giteam
It's also a strong statement that leadership doesn't want to get fired, and that leadership would love their equity stake to increase in value. Stock buybacks are not investments in the company, as Apple already got everything they were going to get when the shares were floated. Apple has been sitting on an absolute pile of cash for a long time.
Sadoksad t1_j28xngx wrote
Stock buy backs are essentially dividends paid out with out the extra tax that investors have to pay (Tax on the dividend AND Tax on the capital gain compared to just tax on the capital gain). Its also easier to manage than paying out dividends to every single investor. Provided the investor is smart enough to take some of his gains out. The rising prices does provide additional liquidity to the big players. In essence, you the layman with his 401k is only there to get screwed over.
Hamoodzstyle t1_j29z78u wrote
Not sure I agree that 401ks are really getting screwed over here. Your standard 401k with some ETFs holding apple stock get more valuable as a result of buybacks. That means more money in the hands of say a retiree pulling money out of their 401k.
Sadoksad t1_j2a0ya3 wrote
You're not wrong but the issue is that the rising price is not sustainable, ie short term. This is because the company no longer wants or needs to retain all that money to grow the business. Over time, the market starts discounting that factor and the buy back gain that you had unrealized, no longer exists. Meaning, you lost out on your dividends. If you take an active role in your personal investments or if you've given your money to some sleazy fund, they'll make sure you're out before the market is. 401k's usually lag behind. I'm not saying you won't be profitable at all, you just lose out on that 'extra profitability'.
Yeti-420-69 t1_j2bw4ny wrote
That's not how market cap works, brother.
Sadoksad t1_j2d3cp2 wrote
shiii mind explaining where I went wrong in my understanding?
Yeti-420-69 t1_j2d4zyj wrote
You have a lemonade stand. Between your 100lbs of lemons, 18 kilos of sugar, some ice cube trays, a table, and the earning potential it has over the next few months, you figure you could sell the business for $1000. This is your 'market cap'.
You want some cash right now to buy a new sign to go over your table and some other things so you decide to 'take your business public' and let 3 of your friends buy in. You split the company into 4 equal 'shares' and value them at $250 each.
Over the summer you all take turns working the stand, you reinvest the profits and open a second stand. Everything is going great until fuckin' Steve decides he's done working, wants to divest of his part of the company and relax until school starts up again.
The company is bigger now, has more inventory, more growth potential, more revenue, cash on hand from recent sales, you all decide to value it at $4000. Now if someone had $1000 they could purchase his share for themselves, but nobody has taken any profits, so instead the company buys back his share with that cash on hand. So by spending $1000 the company is now worth $3000 and is split 3 ways as that share was destroyed. Your shares are still worth $1000 each but now you own a larger piece of the company. This will mean a larger cut of future profits in the form of dividends and greater growth potential in the price of the stock, as future valuations will divide the market cap by 3 instead of 4.
I'm stoned and that seemed like a good way to explain it lol I hope it makes sense.
Edit: and I'm not American but isn't a 401k just a type of retirement account? They're just going to hold index and mutual funds.. those don't 'lag' the market, they're just collections of different equities and bonds.
Sadoksad t1_j2denk6 wrote
I didn't need you to explain market cap but thanks for the effort, I'm sure it will helpful to someone. The reason I asked you was because I wanted to know your opinion or your angle on the buy back of apple, that is the same angle I took when I wrote the other downvoted comment.
>This will mean a larger cut of future profits in the form of dividends and greater growth potential in the price of the stock, as future valuations will divide the market cap by 3 instead of 4.
The reasoning I used was, Apple isn't a growing company. Its well mature. I don't think we'll be seeing larger future profits in the form of dividends or greater growth potential. I mean with their product range ever increasing in price, I can't imagine they'd be breaking their sales record any time soon. I personally don't see them growing atleast in the next 5 years unless they come up with better innovation and cheaper prices.
The scenario that you explained is perfect for share buy backs of growing companies that are undervalued. They eventually increase value for the investors long term. But if the shares are overvalued keeping in mind its future prospects, and then you buy them back, it hurts the share holders long term. Any fund manager worth his salt will recognize that and will underweight his position at the very atleast. 401k, which like you said are a bunch of mutual funds and ETFs aren't known to be ahead of the curve. Which is what I meant by lag.
At the end of the day all my comments were entirely based upon the fact that I don't see Apple growing. Which is my opinion and I can of course be wrong.
Edit- Fuck. Now you have me doubting. Am I still wrong?
Yeti-420-69 t1_j2dgqg7 wrote
I'm just talking generically, I didn't have Apple in mind, but yes I still think you're incorrect. Reduction of the float is permanent.
I hate Apple's business practices and agree they have peaked. It's been dead to me since the 4S
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