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> Stocks the size of Apple are never "extremely" under/over priced. Size has nothing to do with whether a stock is over or underpriced. Apple could rather cons

by aneth4 14y ago

> Stocks the size of Apple are never "extremely" under/over priced. Size has nothing to do with whether a stock is over or underpriced. Apple could rather conservatively be valued at $600 or even $700 per share. I'd say that's an extreme underpricing, particularly given the difference in market cap that would make. > The market seems to believe that the level of sales and/or profits per sale are unsustainable in the medium term. There are other reasons for a stock to be depressed that may in fact have to do with the size of Apple. For sure they are in a fickle market and there is risk.

rednukleus 14y ago
> Size has nothing to do with whether a stock is over or underpriced. The reason why size does matter is that there are thousands of analysts constantly monitoring the stock, and companies are constantly trading based on their informed opinion of the value of the stock. A small, relatively infrequently traded, stock is far more likely to get out of line with fundamentals.
- aneth4 14y ago
  You could also make an argument that a large stock like Apple gets out of line with fundamentals because it represents such a large portion of pretty much every institutional portfolio that could own the stock, so movements are often due to portfolio rebalancing than fundamentals. This seems likely to be the case with Apple right now.
  - rednukleus 14y ago
    Then you would be making an argument that flies in the face of every investment textbook Ive ever read.
    - aneth4 14y ago
      Significant demand in a large cap stock mostly comes from large institutional investors. Large institutional investors are finite, and those investors must limit how much any stock represents in their portfolio. Regardless of what your textbooks say, it is true situation.
      - rednukleus 14y ago
        It only takes a few hedge funds and a couple of Goldman Sachs to balance out any of those effects. I'm sorry, but you clearly have no idea what you are talking about.
        aneth4 14y ago
        Because hedge funds will bid up a stock that no one else is allowed to buy? I thought they like to make money. Markets are often undervalued due to restrictions on buyers. The bull case for the stock is that AAPL will make itself the buyer of last resort, as I expect them to do this earnings announcement. Knowing that the stock is undervalued and that any price increase due to their purchases will be maintained by the market, they can confidently buy the stock back. Dividends can have a similar effect to a buyback, and also expose the stock to dividend focused funds. Large cap companies often must resort to these tactics to increase the number of available buyers when their stock is widely owned.
fauigerzigerk 14y ago
Whether or not a stock is over or underpriced at a particular point in time can only ever be determined with hindsight and relative to other investment opportunities. My own view at this point is that there is a rotation going on. Growth investors are leaving Apple because it's too big to continue to grow at the rate it used to, and value investors are still cautious, waiting for a bottom.

by aneth4 14y ago

rednukleus 14y ago

> Size has nothing to do with whether a stock is over or underpriced. The reason why size does matter is that there are thousands of analysts constantly monitoring the stock, and companies are constantly trading based on their informed opinion of the value of the stock. A small, relatively infrequently traded, stock is far more likely to get out of line with fundamentals.

aneth4 14y ago
You could also make an argument that a large stock like Apple gets out of line with fundamentals because it represents such a large portion of pretty much every institutional portfolio that could own the stock, so movements are often due to portfolio rebalancing than fundamentals. This seems likely to be the case with Apple right now.
- rednukleus 14y ago
  Then you would be making an argument that flies in the face of every investment textbook Ive ever read.
  - aneth4 14y ago
    Significant demand in a large cap stock mostly comes from large institutional investors. Large institutional investors are finite, and those investors must limit how much any stock represents in their portfolio. Regardless of what your textbooks say, it is true situation.
    - rednukleus 14y ago
      It only takes a few hedge funds and a couple of Goldman Sachs to balance out any of those effects. I'm sorry, but you clearly have no idea what you are talking about.
      - aneth4 14y ago
        Because hedge funds will bid up a stock that no one else is allowed to buy? I thought they like to make money. Markets are often undervalued due to restrictions on buyers. The bull case for the stock is that AAPL will make itself the buyer of last resort, as I expect them to do this earnings announcement. Knowing that the stock is undervalued and that any price increase due to their purchases will be maintained by the market, they can confidently buy the stock back. Dividends can have a similar effect to a buyback, and also expose the stock to dividend focused funds. Large cap companies often must resort to these tactics to increase the number of available buyers when their stock is widely owned.

fauigerzigerk 14y ago

Whether or not a stock is over or underpriced at a particular point in time can only ever be determined with hindsight and relative to other investment opportunities. My own view at this point is that there is a rotation going on. Growth investors are leaving Apple because it's too big to continue to grow at the rate it used to, and value investors are still cautious, waiting for a bottom.