Here is the latest conversation I had with money manager Andrew Horowitz…. new insights for anyone who invests in anything. This week the market continues marching up. Apple tricks market, kills the numbers.
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The same apples auditing room is here to play with kids…apple beats every thing,the highest marketers now..going to touch the heights of heaven.
Why is apple stock worth anything at all? They haven’t paid any dividend in 15 years and if there have been no public rights issues since that time, when they were trading at $4 a share, why would they feel the need to give any return now or ever. All their current success appears to have been built from a point when they were effectively bankrupt with cash injections from the two Steves.
I can see that the value of the stock does appear to be linked to the success of the company though. I’m guessing it’s the same as trading baseball cards – as a team or player is more successful the value goes up. Is this right?
#2 When you own stock, you actually own a piece of the company. As a company’s earnings and holdings grow, so does it’s stock value. Apple has multiple successful lines of products and tens’s of billions in cash. Because of its ready cash, Apple is positioned to get exceptional deals on parts and manufacturing, acquire other companies and technology, and weather unexpected problems (free iPhone 4 bumpers for example). These are all good reasons for a company interested in growth to retain cash rather than paying out dividends.
People who buy Apple stock are gambling the the company will continue to increase in value and earning potential so that each share of stock will appreciate accordingly. Apple is considered a growth stock rather than an income stock. Your profit comes when you sell the appreciated stock, rather than as dividends paid out over time.
See:
http://investopedia.com/terms/i/incomestock.asp
http://investopedia.com/terms/g/growthstock.asp
It’s magical.