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I'm just here to set in stone and state for the record that I believe this will be a losing play. My reasons are here: Rationale here from a comment over 3 mon

I'm just here to set in stone and state for the record that I believe this will be a losing play. My reasons are here: Rationale here from a comment over 3 months ago: https://news.ycombinator.com/item?id=11035168 https://news.ycombinator.com/item?id=11035168 > last time I was on an airplane (December), every single older woman over the age of 60 had an iPhone. This means that it's not only reached critical mass (the late majority on the technology adoption curve has been achieved), but now it's no longer hip. > I'm not sure what will be next, but I'm guessing it won't be Apple's. > Were I gambling man, I'd have shorted Apple's stock right there after that airplane ride. So when I'm wrong, y'all can roast me proper.

faraggi 10y ago
Those seem like valid suppositions, but I do think you're missing a big variable. (I think) you only take into account the US Market but the emerging world is late to the party and should represent a big piece of the pie. It hasn't reached majority tech adoption nor is it no longer hip. That said, I also think its a loosing move because of the downwards trend in AAPL stock- bit that's only layman's conjecture. I guess it depends for how long they want to hold it.
- twcooper 10y ago
  Buffett and his managers aren't concerned about the stock price "trend," they're looking at the stock price in relation to the intrinsic value of the equity. With that said, I'd bet Todd Combs made the investment and he does trade more frequently than Buffett and Ted Weschler.
kfk 10y ago
Be careful thinking Apple will keep sellng iphones and ipads. Their expertise and their cash can probably be thrown into a lot of industries with disruptive success (car industry, pharma, space exploration, etc.). Even the name, Apple, does not bind the company to any specific line of product. I think what the investors are betting here is the ability of Apple of coming up with something as big as the ipod-ipad saga in the coming years. I can see risk in this assumption, but I don't believe is 100% going to turn out badly, so far I'd distribute probabilities equally and do a 50/50 that Apple gives the investors 10x in the next 10 years.
- throwaway2048 10y ago
  You truely beleive that a company with almost the largest market capitization of any company has a large chance of increasing it by 10x?
  - rplst8 10y ago
    This - and the fact that branching out of phones/tablets/computes into cars or space exploration would be a pretty big jump industry wise. Everything they've built to-date has been an extension of either desktop and portable computing or Internet/networking/web technology. The one exception to this is their Music/Book/Movie business, but from my understanding those not only pale in comparison to their "physical" device sales, they are only done out of necessity to supply said devices.
  - colbyh 10y ago
    in 1993 Exxon was the world's most valuable company with a market cap of roughly $80B. they didn't reappear as the most valuable company again until 2007 with a valuation of roughly $500B. yeah, big swings are still possible even in very established markets.
    - aurelianito 10y ago
      How do these numbers look closer if you correct for inflation. $80B in 1993 are equivalent to $114.79B in 2007.
  - kfk 10y ago
    The way I see it, Apple either grows exponentially or linearly and I give those outcomes a 50/50. By the way, a company doesn't need to do 10x the stock price to deliver 10x to investors. They can pay dividends. They can sell divisions. We have been enjoying exponential growth for a while now: https://ourworldindata.org/wp-content/uploads/2013/11/long-term-real-growth-of-gdp-in-the-us-1871-2009-visualizing-economics-645x447.png https://ourworldindata.org/wp-content/uploads/2013/11/long-t...
- roadnottaken 10y ago
snowwrestler 10y ago
Apple is already priced as a low-growth stock (P/E around 10). So if they never do anything more than leverage the brand loyalty of iPhone customers, they'll still fulfill the expectations of their price. An adoption curve leveling off is a normal thing in business; money can still be made. When did the adoption curves for insurance, paint, homes, jewelry, soft drinks, etc. level off? Long before Berkshire Hathaway came along, but they have done pretty well in all of those of markets. I think BH has a good chance of getting a return.
- cleaver 10y ago
  I didn't realize the P/E was so low. Sounds like a bargain. Edit: They're paying a modest dividend as well. AAPL is becoming more of a mature stock, but that's not a bad thing.
  - craigyk 10y ago
    Apple's P/E has always been low compared to its peers. Even when the iPhone and iPad growth were both very high, I think it has always had a < 20 P/E.
  - jbverschoor 10y ago
    If you discount cash, it's actually around 6
kolbe 10y ago
Why can't they slog along with compressed margins for the next 20 years? There are hundreds of viable companies in the S&P 500 that have fully realized their user base, but are perfectly good investments. I feel like SV types get too hung up on growth, and fail to see that producing consistently high profit is still a great way to make money.
ethanbond 10y ago
Why does an older person using something mean that a younger person wouldn't want to? There's no Android device on earth that's nearly as hip as the iPhone. Regardless of how many old people are on iOS.
- exclusiv 10y ago
  This happened with Cadillac and they've been spending a lot of money to appeal to a younger demo.
  - ethanbond 10y ago
    No, it didn't. Cadillac didn't suddenly become unappealing to young people just because old people like them. They became unappealing because they were simply unappealing to young people and there were more appealing options for young people. Android has yet to produce anything that even remotely resembles a more appealing option to these demographics. Apple is an expert in "hip." If you have an Android and your friend has an iPhone, you know that your messages are showing up green whereas everyone else's are showing up blue. This lack of totally 100% superficial conformity alone means that Android has a monstrous hill to climb with younger people, e.g. the people who care most deeply about acceptance amongst peers.
    - exclusiv 10y ago
      Yes - branding drives perception which can drive consumer decisions. Consumers can also drive a brand. Certainly skewing old wasn't the only factor for Cadillac but it definitely was a component and they are trying to spend their way out of that image (both with ads and with more performance-minded cars). I agree that Apple is an expert at hip but their time dominating is limited. It gets harder to be hip when so many people, especially those much older have them and mom/dad/grandma/grandpa all want to Facetime you. Younger people have been migrating their time away from Facebook because of the saturation. I disagree on Android and the data doesn't back up your statements. Android is comparable with younger demos [3] and has more market share [1] (esp. outside the US) [2] so they don't "have a monstrous hill" to climb with younger people. Android and device manufacturers are positioned quite well. It's going to be a challenge for Apple to continue to ask for a premium price when they no longer have a compelling quality argument and Android OS and devices keep getting better with many outperforming the iPhone. People are also getting tired of Apple's closed systems. They are "The Man" but most consumers haven't realized it yet. The squeezing they do with storage is ridiculous. [1] 52.8% market share in the US, Jan 2016 - https://www.comscore.com/Insights/Rankings/comScore-Reports-January-2016-US-Smartphone-Subscriber-Market-Share https://www.comscore.com/Insights/Rankings/comScore-Reports-... [2] 80.7% market share globally, 4Q2015 - http://www.gartner.com/newsroom/id/3215217 http://www.gartner.com/newsroom/id/3215217 [3] 52% of millenials have an Android device vs 44% for iPhone, 2014 - http://www.techtimes.com/articles/15084/20140908/draft-android-reigns-over-ios-millennials.htm http://www.techtimes.com/articles/15084/20140908/draft-andro...
deleted 10y ago
[deleted]
fla 10y ago
I dont undertand, why reaching the critical mass would make the business fail ? It's not all about growth
- exclusiv 10y ago
  It wouldn't make them fail but as an investment the growth could be priced in which is bad if they miss targets.
  - kolbe 10y ago
    Apple is a 10 P/E, FYI. And their earnings are GAAP, unlike their "growing" peers.
oskarth 10y ago
This is the top comment in this thread at the time of this writing, and it's armchair opinionitis at its best. Put your money where your mouth is if you truly believe what you are saying. Until then your "setting in stone and stating for the record" is completely meaningless. For one thing you haven't considered that this might be priced into their P/E ratio, unlike most other growth tech companies. If you were a "gambling man" this would be part of the equation in deciding if they are over- or undervalued.
whatok 10y ago
Do you not get out much? Old people been using iPhones since forever.
matt4077 10y ago
The efficient market hypothesis would like a word with you.
mmanfrin 10y ago
This has zero to do with the value proposition of the stock. AAPLs P/E is below 10 at this point. They have about 1/3rd their value in cash alone, which means their actual P/E is even lower. It doesn't matter if grandmas are using Apple products, they are a seriously good-value stock.
toddmorey 10y ago
This all assumes that Apple, who has a solid history of product category pivots, has no plans, ambitions, or interest in entering new markets. Remember how saturated iPods became? Remember when it seemed they were running out of colors and ideas for new music players? The answer was iPhone.
ssharp 10y ago
What phone is "hip"? Phones might have reached the point where there isn't going to be another big paradigm shift anytime soon that changes the ways phones are used like the iPhone changed things. So Apple (and Samsung, etc.) may have exhausted a lot of the growth opportunities in the mobile market, but there are still other markets for them. Apple didn't even have a phone product 10 years ago, so it's hard to say what their future endeavors will be. Betting on Apple doesn't mean betting solely on the iPhone.
coldcode 10y ago
At my church I play in a music group with mostly high school students. Virtually all of them have iPhones. So it's not a good indicator.
- dragonwriter 10y ago
  Your experience may not be representative of the general market. http://www.marketingprofs.com/charts/2013/10957/how-iphone-and-android-ownership-varies-by-demographic http://www.marketingprofs.com/charts/2013/10957/how-iphone-a...
samsonradu 10y ago
> last time I was on an airplane (December), every single older woman over the age of 60 had an iPhone. This means that it's not only reached critical mass (the late majority on the technology adoption curve has been achieved), but now it's no longer hip. I think it hasn't yet reached critical mass yet in plenty of second world countries. In Romania for instance there are plenty of lower end phones (specially /w teenagers) not because it's not hip (on the contrary, it yields social status) but because compared to the average wage here it's expensive as hell. The iPhone SE will probably sell heavily around here. EDIT An US (correct me if I'm wrong) airport might not actually give an accurate picture of the market since the lower class doesn't fly planes that often.

faraggi 10y ago

Those seem like valid suppositions, but I do think you're missing a big variable. (I think) you only take into account the US Market but the emerging world is late to the party and should represent a big piece of the pie. It hasn't reached majority tech adoption nor is it no longer hip. That said, I also think its a loosing move because of the downwards trend in AAPL stock- bit that's only layman's conjecture. I guess it depends for how long they want to hold it.

twcooper 10y ago
Buffett and his managers aren't concerned about the stock price "trend," they're looking at the stock price in relation to the intrinsic value of the equity. With that said, I'd bet Todd Combs made the investment and he does trade more frequently than Buffett and Ted Weschler.

kfk 10y ago

Be careful thinking Apple will keep sellng iphones and ipads. Their expertise and their cash can probably be thrown into a lot of industries with disruptive success (car industry, pharma, space exploration, etc.). Even the name, Apple, does not bind the company to any specific line of product. I think what the investors are betting here is the ability of Apple of coming up with something as big as the ipod-ipad saga in the coming years. I can see risk in this assumption, but I don't believe is 100% going to turn out badly, so far I'd distribute probabilities equally and do a 50/50 that Apple gives the investors 10x in the next 10 years.

throwaway2048 10y ago
You truely beleive that a company with almost the largest market capitization of any company has a large chance of increasing it by 10x?
- rplst8 10y ago
  This - and the fact that branching out of phones/tablets/computes into cars or space exploration would be a pretty big jump industry wise. Everything they've built to-date has been an extension of either desktop and portable computing or Internet/networking/web technology. The one exception to this is their Music/Book/Movie business, but from my understanding those not only pale in comparison to their "physical" device sales, they are only done out of necessity to supply said devices.
- colbyh 10y ago
  in 1993 Exxon was the world's most valuable company with a market cap of roughly $80B. they didn't reappear as the most valuable company again until 2007 with a valuation of roughly $500B. yeah, big swings are still possible even in very established markets.
  - aurelianito 10y ago
    How do these numbers look closer if you correct for inflation. $80B in 1993 are equivalent to $114.79B in 2007.
- kfk 10y ago
  The way I see it, Apple either grows exponentially or linearly and I give those outcomes a 50/50. By the way, a company doesn't need to do 10x the stock price to deliver 10x to investors. They can pay dividends. They can sell divisions. We have been enjoying exponential growth for a while now: https://ourworldindata.org/wp-content/uploads/2013/11/long-term-real-growth-of-gdp-in-the-us-1871-2009-visualizing-economics-645x447.png https://ourworldindata.org/wp-content/uploads/2013/11/long-t...
roadnottaken 10y ago

snowwrestler 10y ago

Apple is already priced as a low-growth stock (P/E around 10). So if they never do anything more than leverage the brand loyalty of iPhone customers, they'll still fulfill the expectations of their price. An adoption curve leveling off is a normal thing in business; money can still be made. When did the adoption curves for insurance, paint, homes, jewelry, soft drinks, etc. level off? Long before Berkshire Hathaway came along, but they have done pretty well in all of those of markets. I think BH has a good chance of getting a return.

cleaver 10y ago
I didn't realize the P/E was so low. Sounds like a bargain. Edit: They're paying a modest dividend as well. AAPL is becoming more of a mature stock, but that's not a bad thing.
- craigyk 10y ago
  Apple's P/E has always been low compared to its peers. Even when the iPhone and iPad growth were both very high, I think it has always had a < 20 P/E.
- jbverschoor 10y ago
  If you discount cash, it's actually around 6

kolbe 10y ago

Why can't they slog along with compressed margins for the next 20 years? There are hundreds of viable companies in the S&P 500 that have fully realized their user base, but are perfectly good investments. I feel like SV types get too hung up on growth, and fail to see that producing consistently high profit is still a great way to make money.

ethanbond 10y ago

Why does an older person using something mean that a younger person wouldn't want to? There's no Android device on earth that's nearly as hip as the iPhone. Regardless of how many old people are on iOS.

exclusiv 10y ago
This happened with Cadillac and they've been spending a lot of money to appeal to a younger demo.
- ethanbond 10y ago
  No, it didn't. Cadillac didn't suddenly become unappealing to young people just because old people like them. They became unappealing because they were simply unappealing to young people and there were more appealing options for young people. Android has yet to produce anything that even remotely resembles a more appealing option to these demographics. Apple is an expert in "hip." If you have an Android and your friend has an iPhone, you know that your messages are showing up green whereas everyone else's are showing up blue. This lack of totally 100% superficial conformity alone means that Android has a monstrous hill to climb with younger people, e.g. the people who care most deeply about acceptance amongst peers.
  - exclusiv 10y ago
    Yes - branding drives perception which can drive consumer decisions. Consumers can also drive a brand. Certainly skewing old wasn't the only factor for Cadillac but it definitely was a component and they are trying to spend their way out of that image (both with ads and with more performance-minded cars). I agree that Apple is an expert at hip but their time dominating is limited. It gets harder to be hip when so many people, especially those much older have them and mom/dad/grandma/grandpa all want to Facetime you. Younger people have been migrating their time away from Facebook because of the saturation. I disagree on Android and the data doesn't back up your statements. Android is comparable with younger demos [3] and has more market share [1] (esp. outside the US) [2] so they don't "have a monstrous hill" to climb with younger people. Android and device manufacturers are positioned quite well. It's going to be a challenge for Apple to continue to ask for a premium price when they no longer have a compelling quality argument and Android OS and devices keep getting better with many outperforming the iPhone. People are also getting tired of Apple's closed systems. They are "The Man" but most consumers haven't realized it yet. The squeezing they do with storage is ridiculous. [1] 52.8% market share in the US, Jan 2016 - https://www.comscore.com/Insights/Rankings/comScore-Reports-January-2016-US-Smartphone-Subscriber-Market-Share https://www.comscore.com/Insights/Rankings/comScore-Reports-... [2] 80.7% market share globally, 4Q2015 - http://www.gartner.com/newsroom/id/3215217 http://www.gartner.com/newsroom/id/3215217 [3] 52% of millenials have an Android device vs 44% for iPhone, 2014 - http://www.techtimes.com/articles/15084/20140908/draft-android-reigns-over-ios-millennials.htm http://www.techtimes.com/articles/15084/20140908/draft-andro...

deleted 10y ago

[deleted]

fla 10y ago

I dont undertand, why reaching the critical mass would make the business fail ? It's not all about growth

exclusiv 10y ago
It wouldn't make them fail but as an investment the growth could be priced in which is bad if they miss targets.
- kolbe 10y ago
  Apple is a 10 P/E, FYI. And their earnings are GAAP, unlike their "growing" peers.

oskarth 10y ago

This is the top comment in this thread at the time of this writing, and it's armchair opinionitis at its best. Put your money where your mouth is if you truly believe what you are saying. Until then your "setting in stone and stating for the record" is completely meaningless. For one thing you haven't considered that this might be priced into their P/E ratio, unlike most other growth tech companies. If you were a "gambling man" this would be part of the equation in deciding if they are over- or undervalued.

whatok 10y ago

Do you not get out much? Old people been using iPhones since forever.

matt4077 10y ago

The efficient market hypothesis would like a word with you.

mmanfrin 10y ago

This has zero to do with the value proposition of the stock. AAPLs P/E is below 10 at this point. They have about 1/3rd their value in cash alone, which means their actual P/E is even lower. It doesn't matter if grandmas are using Apple products, they are a seriously good-value stock.

toddmorey 10y ago

This all assumes that Apple, who has a solid history of product category pivots, has no plans, ambitions, or interest in entering new markets. Remember how saturated iPods became? Remember when it seemed they were running out of colors and ideas for new music players? The answer was iPhone.

ssharp 10y ago

What phone is "hip"? Phones might have reached the point where there isn't going to be another big paradigm shift anytime soon that changes the ways phones are used like the iPhone changed things. So Apple (and Samsung, etc.) may have exhausted a lot of the growth opportunities in the mobile market, but there are still other markets for them. Apple didn't even have a phone product 10 years ago, so it's hard to say what their future endeavors will be. Betting on Apple doesn't mean betting solely on the iPhone.

coldcode 10y ago

At my church I play in a music group with mostly high school students. Virtually all of them have iPhones. So it's not a good indicator.

dragonwriter 10y ago
Your experience may not be representative of the general market. http://www.marketingprofs.com/charts/2013/10957/how-iphone-and-android-ownership-varies-by-demographic http://www.marketingprofs.com/charts/2013/10957/how-iphone-a...

samsonradu 10y ago

> last time I was on an airplane (December), every single older woman over the age of 60 had an iPhone. This means that it's not only reached critical mass (the late majority on the technology adoption curve has been achieved), but now it's no longer hip. I think it hasn't yet reached critical mass yet in plenty of second world countries. In Romania for instance there are plenty of lower end phones (specially /w teenagers) not because it's not hip (on the contrary, it yields social status) but because compared to the average wage here it's expensive as hell. The iPhone SE will probably sell heavily around here. EDIT An US (correct me if I'm wrong) airport might not actually give an accurate picture of the market since the lower class doesn't fly planes that often.