Friday, October 3, 2008

Apple: a Berkshire Hathaway Company

Apple would be a great fit for Mr. Buffet.  And since he is on a buying spree...

Apple's stock closed Thursday at $100.10 a share a new 52 week low.  Their market cap is now less than 90 billion dollars soooo anyone wanna team up with Warren and  buy a computer company?  

You and your new business partner Warren Buffet can buy Apple Co. today for less than 100 Billion dollars.  Here is what you get... for the low low price of $90 billion dollars.  You get 4.5 billion in earnings (TT) growing at 25-35%. [maybe more!] and 27 Billion in current assets!

27 Billion!  

You and your buddy Warren will get Apple for 61 billion dollars (88-27)  which is effectively 13.5x trailing earnings.  Why?  you say are you and your partner Warren interested in this clearly suffering company (stock price down 50% YTD)?  

  • Sustainable world wide growth (at a significant discount)
  • Unsurpassed brand loyalty, 
  • FAT margins (albeit narrower than historically)  
  • Best in class products (Mobile computing, Computers, Music Players)
Apple has finance all of its amazing growth over the last 8 years from available cash flow, so has no debt and the best employees in silicon valley

Realistically a takeover of Apple would cost significantly more than the current stock price and it's not like the world is flush in takeover capital right now.  The point is that this is a crazy successful and strong company with huge prospects for the future.  What multiple would you pay for Dell's 3% margin, GM's millions in losses, the entire finance industry's mystery balance sheets?

Writer is long Apple and loves his mother.  You should love your mother but Apple is up to you.  Do not suppose that writer is suggesting other than loving your mother.  Your finance decisions are yours alone.


Unknown said...

I'd only buy Apple if I were Steve Jobs, since it's unlikely anyone else will be able to run Apple anywhere near as successfully.

Unknown said...

Warren Buffett would probably never touch such an unstable stock as Apple. It's too easily manipulated. I thought he liked conservative stocks. Apple seems to trade in such a wide range every week. I don't see how anyone can determine it's value. Mr. Buffett certainly won't be buying it for returns next year, since it's being said that Apple sales will be in the toilet in 2009. Long investors won't see what they paid out for Apple a month ago for a whole year. This economy sucks.

Jonathan Lehr said...

Great article, thanks! Looks like AAPL is back to being a value play in addition to being a solid growth stock.

Full disclosure: I love my mom. Plus I'm long Apple.

BnVested said...


If Berkshire were to buy the company there would be no stock left.

Therefore no unstablenessability