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I think the bears are vastly underestimating the size and power of the moat (or garden wall) that Apple has built. Apple's brand loyalty is ludicrously high, bu

I think the bears are vastly underestimating the size and power of the moat (or garden wall) that Apple has built. Apple's brand loyalty is ludicrously high, but even the people who don't care that much about the brand are way more trapped in the ecosystem than most people realize. Seeing a heavy Apple user try switching to Linux on their laptop was a real eye opener for me. I'm bullish on Apple stock because they could afford to go a very long time without huge wins, and still be wildly powerful and in control of the tech lives of a huge percentage of the population. Apple also iterates and polishes over time until it's the best, and they have plenty of time. Going bearish on Apple is a bad move IMHO.

agumonkey 2y ago
Gotta say they handled the post jobs era well financially.
currio 2y ago
What you said (if true) makes Apple a great business. And your reasonable arguments make a good case for that. But does it make a good investment? A good investment is investing in a great business at a reasonable price. If the price is unreasonably high, then even a great business makes for a bad investment.
- freedomben 2y ago
  > But does it make a good investment? A good investment is investing in a great business at a reasonable price. If the price is unreasonably high, then even a great business makes for a bad investment. This depends on whether you are thinking short-term or long-term. Short-term, I don't know because at this point I'm exclusively a long-term investor (something I might should have mentioned in my original comment). The current price (for a company as big and mature as Apple) is essentially a gauge of how bullish vs bearish big investors are feeling about the sector and the specific company. It may fluctuate up and down a little bit based on news and such, but long-term I expect it to do well.
  - lazide 2y ago
    Long term or short term doesn’t change that question at all.
    - tsunamifury 2y ago
      Yea this guy doesn’t understand how returns work at all. What he described makes it both long term and short term a bad investment. But he seems uneasy what “buying at peak” is.
    - freedomben 2y ago
      Sure it does. It doesn't mean it's impossible for long-term to be overpriced, but it is definitely a lot less likely to be significant/impactful, and if it is overpriced and experiences a correction, you're much more likely to be able to ride it out and average into a reasonable position over time. With long term you're looking for several % growth per year, over multiple years. With long term you're much less sensitive to overpricing. Short term on the other hand carries significant risk of overpricing, because you're concerned about tiny % changes over short periods of time. With volatility/risk, the length makes a big difference.
      - lotsofpulp 2y ago
        What you are writing is valid for investing in broad market index funds, but not for investing in individual businesses. Warren Buffet's goals are not the same as those of someone who wants to maximize long term returns while also minimizing time and effort spent evaluating investment options.
      - lazide 2y ago
        Not really. It may look that way if all you see is historical averages (and you dollar cost average) but there are definitely times when buying will screw you indefinitely compared to not. Valuation absolutely matters, and buying when something is overvalued can irrevocably screw you over. And that is on a broad market basis - individual companies can just flat out go bankrupt and cease to exist. If you bought in ‘72 or ‘99 for instance, it was a very, very long time before you’d even be able to cash out neutral.
- sk11001 2y ago
  The thing about Berkshire is that they're so big that they can either buy pieces of huge companies like Apple, all of which have high valuations, or they can sit on the cash. Nothing else moves the needle for them - an amazing multi-million dollar business would be 0.0.. % of their portfolio.
zpeti 2y ago
I don’t think this has anything to do with apple. It’s about getting out before a likely market crash, that will inevitably lower the value of almost all companies. The only risk here for buffet is the fed coming in with a huge rate cut or just suggesting it, or restarting QE in light of a market crash, which will give stock markets an insane boost (including apple)
- loceng 2y ago
  Are they putting their cash into gold or similar then? A market crash will also coincide with the US dollar crash, no? Or is a market crash separate from the US dollar failing?
  - jjtheblunt 2y ago
    If Berkshire Hathaway sells 1 million shares of AAPL for N dollars per share, and the market drops the price to .8 * N dollars per share, he just buys more shares back with those same dollars, for example. It would be a very Buffett thing to do, because shares produce dividends per share, so increasing share count is its own strategy.
  - lazide 2y ago
    They are not necessarily correlated - but often can be. [https://www.fidelity.com/learning-center/trading-investing/strong-dollar#:~:text=While%20a%20strong%20dollar%20may,want%20to%20diversify%20their%20portfolios https://www.fidelity.com/learning-center/trading-investing/s....]
  - ruune 2y ago
    A bubble burst or similar doesn't have to crash the whole economy. It definitely can, especially when it's stuff like financial or real estate. A tech bubble burst would devalue many of the highest valued stocks but doesn't have to take the entire USD down with it. That being said, I haven't studied economics and am very much a layman. So if someone wanna correct me, please do!
    - rsdfvn1099 2y ago
abirch 2y ago
I don't think he's necessarily bearish on Apple. Buffett could feel like the entire market is overvalued like in 2001. Even Microsoft fell for a few years with great profits.
- freedomben 2y ago
  Thanks, that's very fair. Berkshire still has a pretty huge stake, which they wouldn't be holding if they were bearish.
  - tsunamifury 2y ago
    Funds like this don’t think one way. They can be bearish, cash out while hedging
    - freedomben 2y ago
      Also fair point. Berkshire has such a significant impact on the market that they have to take a long-term approach just to changing their stake, lest they sway the market. I've never been involved with a big firm like this, but I would also imagine there's some regulation involved around what/how they're able to operate, so that could also be a non-trivial factor in their decisions and current positions.
throw0101d 2y ago
> I think the bears are vastly underestimating the size and power of the moat (or garden wall) that Apple has built. See 'Are "Good Companies" Good Investments?' (references used in the description): * https://www.youtube.com/watch?v=ZY_NFQNUr_k https://www.youtube.com/watch?v=ZY_NFQNUr_k The above is a summary of this podcast episode, 'The "Good Company is a Good Investment" Fallacy': > It sounds reasonable to say that investing in the most popular companies would produce the best returns, but this is just not how asset pricing works. Today on the show, we unpack the ‘good company is a good investment’ fallacy. Before diving into the main topic, we kick off our discussion on the subject of index funds with Robert Wigglesworth’s Trillions. From there, we share some updates about custom indexing and home buying in Canada, along with the immense valuation of Tesla as well as Elon Musk’s net worth. This acts as a great segue into the focus of today’s show: a so-called good company has high historical returns, strong earnings growth, strong forecasted earnings growth, and high prices. But just because the good companies have done well historically, this does not mean they will continue to be a good investment. In fact, there is a premium that says that higher-priced stocks earn lower returns than lower-priced stocks and value stocks. We unpack several papers that explore the concept that it is the lesser-known companies that tend to have better returns. We also get into how growth extrapolation, the skewness effect, and the big market delusion plays into the good company is a good investment fallacy. Our discussion concludes with the idea that investors are better off paying attention to expected returns rather than falling victim to extrapolation errors. Tune in today! * https://rationalreminder.ca/podcast/174 https://rationalreminder.ca/podcast/174
dtech 2y ago
You're making the classic mistake that thinking a company makes a good product they're a good stock. If the stock has sky high expectations and the company does "only" very good, the stock might still fall.
- freedomben 2y ago
  > You're making the classic mistake that thinking a company makes a good product they're a good stock. If the stock has sky high expectations and the company does "only" very good, the stock might still fall. Disagree with the first sentence, fully agree with the last. My read/feel on expectations right now is that Apple has generally lower expectations from institutional investors than what is warranted, certainly from Berkshire. Berkshire certainly isn't bailing, but there's clear indications that Apple isn't expected to be the rocket ship they previously thought it would be.
beambot 2y ago
Everything you say can (and probably is) true, but the company can still be vasstly overvalued on a P/E basis.
light_triad 2y ago
Indeed great moat and brand loyalty but a big question is how much can they grow now that they’re so massive
coliveira 2y ago
Yes, in the US and Europe. But Apple lost China and many parts of the world don't have the same loyalty to them. This may put Apple's profits in jeopardy in the medium to long term.
- freedomben 2y ago
  Fair point, although from what I've heard they are experiencing great numbers in China, including achieving that important "status symbol" or "luxury brand" status that has helped make them so formidable in the US. I also think the US and EU markets are so big that they've got time (and plenty of money) to figure out Asia and Africa.
- RandomThoughts3 2y ago
  To be fair their position in Europe is not particularly stellar either. It’s good but can’t be compared to their US stronghold.
mschuster91 2y ago
> I think the bears are vastly underestimating the size and power of the moat (or garden wall) that Apple has built. Apple's size/moat is one thing. That will last them for years to come, in no small part because the competition is dog shit (Windows is an ad ridden hellhole that constantly enshittifies itself with each generation, and Linux, well, every year has been "the year of Linux on desktop" for like two decades now?). But there isn't much potential for true growth in their existing product categories either, and this is IMHO why Buffett is dropping such a large stake. Western markets are pretty much saturated, India/China's population parts that can afford Apple stuff just as well, and for other markets Apple is just too high a price point. Making that worse is that the Apple Vision, the first entirely new class of product in years, has utterly and miserably flopped. > Seeing a heavy Apple user try switching to Linux on their laptop was a real eye opener for me. Depends which part of macOS they're mostly using... if it's mostly a web browser, Terminal and IntelliJ, VSCode or whatever, switching is relatively painless. The challenge is hardware support, and a bunch of stuff isn't supported by Asahi Linux.
- freedomben 2y ago
  > Depends which part of macOS they're mostly using... if it's mostly a web browser, Terminal and IntelliJ, VSCode or whatever, switching is relatively painless. The challenge is hardware support, and a bunch of stuff isn't supported by Asahi Linux. For the person I saw, it wasn't the OS itself really that was the problem. For him it was the integration with his iPhone, watch, his magic trackpad, Home Pods, and some apps and other digital goods that he had purchased that became hard to consume. There weren't any hard deal breakers, but so many thousands of paper cuts that it became overwhelming (which as I understand it, is exactly the strategy Apple is pursuing).
wklauss 2y ago
I don't think Berkshire is particularly bearish on Apple. It's just they made good money out of the investment and it's a good time to cash out and keep cash for future buys. The fact that they kept half of it tells you they still consider it a solid position but if there's a downturn ahead, having cash on hand to buy other companies makes sense.
- allthing 2y ago
  Exactly, this is a rebalancing since Apple because a huge portion of Berkshire's portfolio due to it's growth. They became over 40% of Berkshire's holdings, too much for them to be comfortable with.
  - chiefalchemist 2y ago
    Right. This is as much about Berkshire's portfolio, investment philosophy and portfolio balance as it is about Apple. Probably more the former than the latter.
mixmastamyk 2y ago
In ~2009 Apple lost 50% of its value—despite previously introducing a world changing product and having billions in the bank. Macro trends affect everyone and premium stocks often get hit hardest.
- freedomben 2y ago
  Yes, but that describes most other stocks too. 2008/2009 was a general blood bath. No matter where your money was (in the stock market) it took a beating.
  - mixmastamyk 2y ago
    Yes, and Apple took a harder beating than usual because it was overvalued (ahead of itself) beforehand. Plausible potential future about to rhyme with the past.
layer8 2y ago
> Seeing a heavy Apple user try switching to Linux on their laptop was a real eye opener for me. Mac sales account for only around 8% of Apple’s revenue.
- freedomben 2y ago
  It's not just Macs though. It's the iPhone, Apple Watch, EarPods, Magic Trackpad, Home Pods, and purchased Mac apps and other digital goods that make switching to a Linux laptop especially painful.
  - layer8 2y ago
    That’s only if you use a Mac as your main driver, which is a minority. Apple makes most of their revenue from people who don’t own a Mac.
samstave 2y ago
Serious Question: What happens to stocks in wartime? And in the next BigWar - a large % of it will be comms related. What happens to telco/handset-providers stocks if they become useless during major warfare?
zcw100 2y ago
> Seeing a heavy Apple user try switching to Linux on their laptop was a real eye opener for me. I’ve been using Linux since 1996 and Linux on the desktop has been and continues to be a disaster. It’s only good for two things, opening a terminal or a web browser.
- majewsky 2y ago
  "Opening a web browser" is nearly sufficient for most users though. So much so that Google based an entire OS around it.
ryandvm 2y ago
Agreed. Apple has a lock on consumers similar to Microsoft in the business market. They may or may not be producing the best products, but switching ecosystems is phenomenally painful.

agumonkey 2y ago

Gotta say they handled the post jobs era well financially.

currio 2y ago

What you said (if true) makes Apple a great business. And your reasonable arguments make a good case for that. But does it make a good investment? A good investment is investing in a great business at a reasonable price. If the price is unreasonably high, then even a great business makes for a bad investment.

freedomben 2y ago
> But does it make a good investment? A good investment is investing in a great business at a reasonable price. If the price is unreasonably high, then even a great business makes for a bad investment. This depends on whether you are thinking short-term or long-term. Short-term, I don't know because at this point I'm exclusively a long-term investor (something I might should have mentioned in my original comment). The current price (for a company as big and mature as Apple) is essentially a gauge of how bullish vs bearish big investors are feeling about the sector and the specific company. It may fluctuate up and down a little bit based on news and such, but long-term I expect it to do well.
- lazide 2y ago
  Long term or short term doesn’t change that question at all.
  - tsunamifury 2y ago
    Yea this guy doesn’t understand how returns work at all. What he described makes it both long term and short term a bad investment. But he seems uneasy what “buying at peak” is.
  - freedomben 2y ago
    Sure it does. It doesn't mean it's impossible for long-term to be overpriced, but it is definitely a lot less likely to be significant/impactful, and if it is overpriced and experiences a correction, you're much more likely to be able to ride it out and average into a reasonable position over time. With long term you're looking for several % growth per year, over multiple years. With long term you're much less sensitive to overpricing. Short term on the other hand carries significant risk of overpricing, because you're concerned about tiny % changes over short periods of time. With volatility/risk, the length makes a big difference.
    - lotsofpulp 2y ago
      What you are writing is valid for investing in broad market index funds, but not for investing in individual businesses. Warren Buffet's goals are not the same as those of someone who wants to maximize long term returns while also minimizing time and effort spent evaluating investment options.
    - lazide 2y ago
      Not really. It may look that way if all you see is historical averages (and you dollar cost average) but there are definitely times when buying will screw you indefinitely compared to not. Valuation absolutely matters, and buying when something is overvalued can irrevocably screw you over. And that is on a broad market basis - individual companies can just flat out go bankrupt and cease to exist. If you bought in ‘72 or ‘99 for instance, it was a very, very long time before you’d even be able to cash out neutral.
sk11001 2y ago
The thing about Berkshire is that they're so big that they can either buy pieces of huge companies like Apple, all of which have high valuations, or they can sit on the cash. Nothing else moves the needle for them - an amazing multi-million dollar business would be 0.0.. % of their portfolio.

zpeti 2y ago

I don’t think this has anything to do with apple. It’s about getting out before a likely market crash, that will inevitably lower the value of almost all companies. The only risk here for buffet is the fed coming in with a huge rate cut or just suggesting it, or restarting QE in light of a market crash, which will give stock markets an insane boost (including apple)

loceng 2y ago
Are they putting their cash into gold or similar then? A market crash will also coincide with the US dollar crash, no? Or is a market crash separate from the US dollar failing?
- jjtheblunt 2y ago
  If Berkshire Hathaway sells 1 million shares of AAPL for N dollars per share, and the market drops the price to .8 * N dollars per share, he just buys more shares back with those same dollars, for example. It would be a very Buffett thing to do, because shares produce dividends per share, so increasing share count is its own strategy.
- lazide 2y ago
  They are not necessarily correlated - but often can be. [https://www.fidelity.com/learning-center/trading-investing/strong-dollar#:~:text=While%20a%20strong%20dollar%20may,want%20to%20diversify%20their%20portfolios https://www.fidelity.com/learning-center/trading-investing/s....]
- ruune 2y ago
  A bubble burst or similar doesn't have to crash the whole economy. It definitely can, especially when it's stuff like financial or real estate. A tech bubble burst would devalue many of the highest valued stocks but doesn't have to take the entire USD down with it. That being said, I haven't studied economics and am very much a layman. So if someone wanna correct me, please do!
  - rsdfvn1099 2y ago

abirch 2y ago

I don't think he's necessarily bearish on Apple. Buffett could feel like the entire market is overvalued like in 2001. Even Microsoft fell for a few years with great profits.

freedomben 2y ago
Thanks, that's very fair. Berkshire still has a pretty huge stake, which they wouldn't be holding if they were bearish.
- tsunamifury 2y ago
  Funds like this don’t think one way. They can be bearish, cash out while hedging
  - freedomben 2y ago
    Also fair point. Berkshire has such a significant impact on the market that they have to take a long-term approach just to changing their stake, lest they sway the market. I've never been involved with a big firm like this, but I would also imagine there's some regulation involved around what/how they're able to operate, so that could also be a non-trivial factor in their decisions and current positions.

throw0101d 2y ago

> I think the bears are vastly underestimating the size and power of the moat (or garden wall) that Apple has built. See 'Are "Good Companies" Good Investments?' (references used in the description): * https://www.youtube.com/watch?v=ZY_NFQNUr_k https://www.youtube.com/watch?v=ZY_NFQNUr_k The above is a summary of this podcast episode, 'The "Good Company is a Good Investment" Fallacy': > It sounds reasonable to say that investing in the most popular companies would produce the best returns, but this is just not how asset pricing works. Today on the show, we unpack the ‘good company is a good investment’ fallacy. Before diving into the main topic, we kick off our discussion on the subject of index funds with Robert Wigglesworth’s Trillions. From there, we share some updates about custom indexing and home buying in Canada, along with the immense valuation of Tesla as well as Elon Musk’s net worth. This acts as a great segue into the focus of today’s show: a so-called good company has high historical returns, strong earnings growth, strong forecasted earnings growth, and high prices. But just because the good companies have done well historically, this does not mean they will continue to be a good investment. In fact, there is a premium that says that higher-priced stocks earn lower returns than lower-priced stocks and value stocks. We unpack several papers that explore the concept that it is the lesser-known companies that tend to have better returns. We also get into how growth extrapolation, the skewness effect, and the big market delusion plays into the good company is a good investment fallacy. Our discussion concludes with the idea that investors are better off paying attention to expected returns rather than falling victim to extrapolation errors. Tune in today! * https://rationalreminder.ca/podcast/174 https://rationalreminder.ca/podcast/174

dtech 2y ago

You're making the classic mistake that thinking a company makes a good product they're a good stock. If the stock has sky high expectations and the company does "only" very good, the stock might still fall.

freedomben 2y ago
> You're making the classic mistake that thinking a company makes a good product they're a good stock. If the stock has sky high expectations and the company does "only" very good, the stock might still fall. Disagree with the first sentence, fully agree with the last. My read/feel on expectations right now is that Apple has generally lower expectations from institutional investors than what is warranted, certainly from Berkshire. Berkshire certainly isn't bailing, but there's clear indications that Apple isn't expected to be the rocket ship they previously thought it would be.

beambot 2y ago

Everything you say can (and probably is) true, but the company can still be vasstly overvalued on a P/E basis.

light_triad 2y ago

Indeed great moat and brand loyalty but a big question is how much can they grow now that they’re so massive

coliveira 2y ago

Yes, in the US and Europe. But Apple lost China and many parts of the world don't have the same loyalty to them. This may put Apple's profits in jeopardy in the medium to long term.

freedomben 2y ago
Fair point, although from what I've heard they are experiencing great numbers in China, including achieving that important "status symbol" or "luxury brand" status that has helped make them so formidable in the US. I also think the US and EU markets are so big that they've got time (and plenty of money) to figure out Asia and Africa.
RandomThoughts3 2y ago
To be fair their position in Europe is not particularly stellar either. It’s good but can’t be compared to their US stronghold.

mschuster91 2y ago

> I think the bears are vastly underestimating the size and power of the moat (or garden wall) that Apple has built. Apple's size/moat is one thing. That will last them for years to come, in no small part because the competition is dog shit (Windows is an ad ridden hellhole that constantly enshittifies itself with each generation, and Linux, well, every year has been "the year of Linux on desktop" for like two decades now?). But there isn't much potential for true growth in their existing product categories either, and this is IMHO why Buffett is dropping such a large stake. Western markets are pretty much saturated, India/China's population parts that can afford Apple stuff just as well, and for other markets Apple is just too high a price point. Making that worse is that the Apple Vision, the first entirely new class of product in years, has utterly and miserably flopped. > Seeing a heavy Apple user try switching to Linux on their laptop was a real eye opener for me. Depends which part of macOS they're mostly using... if it's mostly a web browser, Terminal and IntelliJ, VSCode or whatever, switching is relatively painless. The challenge is hardware support, and a bunch of stuff isn't supported by Asahi Linux.

freedomben 2y ago
> Depends which part of macOS they're mostly using... if it's mostly a web browser, Terminal and IntelliJ, VSCode or whatever, switching is relatively painless. The challenge is hardware support, and a bunch of stuff isn't supported by Asahi Linux. For the person I saw, it wasn't the OS itself really that was the problem. For him it was the integration with his iPhone, watch, his magic trackpad, Home Pods, and some apps and other digital goods that he had purchased that became hard to consume. There weren't any hard deal breakers, but so many thousands of paper cuts that it became overwhelming (which as I understand it, is exactly the strategy Apple is pursuing).

wklauss 2y ago

I don't think Berkshire is particularly bearish on Apple. It's just they made good money out of the investment and it's a good time to cash out and keep cash for future buys. The fact that they kept half of it tells you they still consider it a solid position but if there's a downturn ahead, having cash on hand to buy other companies makes sense.

allthing 2y ago
Exactly, this is a rebalancing since Apple because a huge portion of Berkshire's portfolio due to it's growth. They became over 40% of Berkshire's holdings, too much for them to be comfortable with.
- chiefalchemist 2y ago
  Right. This is as much about Berkshire's portfolio, investment philosophy and portfolio balance as it is about Apple. Probably more the former than the latter.

mixmastamyk 2y ago

In ~2009 Apple lost 50% of its value—despite previously introducing a world changing product and having billions in the bank. Macro trends affect everyone and premium stocks often get hit hardest.

freedomben 2y ago
Yes, but that describes most other stocks too. 2008/2009 was a general blood bath. No matter where your money was (in the stock market) it took a beating.
- mixmastamyk 2y ago
  Yes, and Apple took a harder beating than usual because it was overvalued (ahead of itself) beforehand. Plausible potential future about to rhyme with the past.

layer8 2y ago

> Seeing a heavy Apple user try switching to Linux on their laptop was a real eye opener for me. Mac sales account for only around 8% of Apple’s revenue.

freedomben 2y ago
It's not just Macs though. It's the iPhone, Apple Watch, EarPods, Magic Trackpad, Home Pods, and purchased Mac apps and other digital goods that make switching to a Linux laptop especially painful.
- layer8 2y ago
  That’s only if you use a Mac as your main driver, which is a minority. Apple makes most of their revenue from people who don’t own a Mac.

samstave 2y ago

Serious Question: What happens to stocks in wartime? And in the next BigWar - a large % of it will be comms related. What happens to telco/handset-providers stocks if they become useless during major warfare?

zcw100 2y ago

> Seeing a heavy Apple user try switching to Linux on their laptop was a real eye opener for me. I’ve been using Linux since 1996 and Linux on the desktop has been and continues to be a disaster. It’s only good for two things, opening a terminal or a web browser.

majewsky 2y ago
"Opening a web browser" is nearly sufficient for most users though. So much so that Google based an entire OS around it.

ryandvm 2y ago

Agreed. Apple has a lock on consumers similar to Microsoft in the business market. They may or may not be producing the best products, but switching ecosystems is phenomenally painful.