Apple ended the year on a downer. APPL was down, Microsoft became the most valued stock, and somebody– The Wall Street Journal, I’m looking at you– decided Apple lost $9-billion investing in the stock market.
Bad. News. Mania.
Good news does not sell as well as bad news. That’s why news media– Faux New, Fake news, or mainstream or lamestream media– puts so much attention on bad news. And, if the bad news isn’t bad enough to sell well, they create their own bad news by implementing the modern form of yellow journalism.
Think of it as controversy where controversy does not really exist. Apple invested in itself and that turned out to be a bad investment of about $9-billion. Alex Allegro explains what happened.
After the surplus of cash the company had through Trump’s 2017 tax overhaul, Apple bought back AAPL shares at peak prices, essentially overpaying for themselves.
What’s the math?
Apple repurchased shares worth nearly $63 billion during the first half of 2018; that sum is now worth around $54 billion.
OK. That’s it. Apple’s investment in itself lost $9-billion. Case closed. Fire CEO Tim Cook and CFO Luca Maestri, dismiss the Apple board of directors.
There’s just one problem in that assessment. It’s wrong. Apple invested money in itself, not the stock market. The money Apple invested in APPL also pulled stock off the market, supposedly increasing shareholder value, and while that may not have been advantageous to anyone during the second half of last year when the entire stock market took a dive– APPL included– it is not the end of the story.
Stock prices– translated as shareholder value– go up and go down. Smart investors buy low and sell high. Every stock sold– higher or lower– is also a stock that is bought by somebody. Will these same The Wall Street Journal clowns point out Apple’s investment brilliance if the market goes up by the end of the year and APPL breaks a new record thanks to a blood glucose function in Apple Watch, a successful Apple Car launch, and Face ID showing up in every Apple product years before facial recognition works in competitor products?
Buy low and sell high is a relative function.
Let’s say I buy a stock at $100 and the value goes down to $80. Does that mean I’m a stupid investor? If I sell the stock at $80, perhaps. But what kind of investor am I if the stock drops to $80 and then climbs back to $150. I’m brilliant, right? Yet, the action is the same. Apple won’t gain much from the stock buybacks but shareholders do and that event did not show up in the scurrilous WSJ analysis.
No, Apple didn’t lose $9-billion investing in itself but The Wall Street Journal loses credibility because Michael Rapoport and Theo Francis’ analysis would not pass Journalism 101. It might get a good grade in a Scurrilous Journalism 202, or Yellow Journalism 120.
Lamestream media, indeed.