As Mel Brooks said in "History of the World, Part I", "It's good to be the king!" That's what I thought about when I heard about Carl Ichan's latest gambit when it came to his massive holding in Apple, Inc. (AAPL). Mr. Ichan owns a reported 53 million shares of AAPL. That is a market value of just shy of $7 Billion. Today he released an open letter to AAPL's CEO Tim Cook. We see a part of the 2000-plus missive as reported by the folks at zerohedge:
We are pleased that Apple has directionally followed our advice and repurchased $80 billion of its shares(yielding the company's shareholders an excellent return), but the company's enormous net cash position continues to grow while the company's shares are still dramatically undervalued. With Apple's shares trading for just $128.77 per share versus our valuation of $240 per share,now is the time for a much larger buyback. We appreciate that the Board just increased the share repurchase authorization by $50 billion, and that it continues to prioritize share repurchases over dividends (as it should). We again simply ask you to help us convince the board of how these two underlying issues (inefficient net cash growth and share undervaluation)persist and combine to enhance the opportunity for accelerated share repurchases in greater magnitude. We also ask you to help us convince the board that this is not a choice between investing in growth and share repurchases. As our model forecasts, despite more than 30% growth in R&D annually through FY 2017 to $13.5 billion (up from $1.8 billion in FY 2010) and your updated capital return program, Apple's net cash position (currently the largest of any company in history) will continue to build on the balance sheet.
Share Repurchases– we assume share repurchases of $37.5 billion, $31.25 billion, and $37.5 billion over the next three year for our forecast and not the more aggressive pace we hope the Board will undertake.
So, here is my take: Mr. Ichan amasses a huge position in AAPL. If/when he wants to sell it, he really can't. If there is even a whiff in the market place that Mr. Ichan is getting out his selling shoes, everybody and their Mother will scramble all over each other to get in front of this price action. So, what to do? What to do? You create demand by trying to convince the mangers over at AAPL that you know their business better than they do and "urge" them to announce a massive buyback to try and make your stake worth just about $1.3 TRILLION!!!! That's is what Mr. Ichan's stake would amount to if AAPL is actually valued at the $240 he says it is worth. That is approximately 8% of the GDP of the United States! Indeed, it is good to be the king!
Trade well and follow the trend, not the perma-bull OR perma-bear "experts."
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