Tuesday, December 15, 2015
Carl Ichan and Apple
Too often the investment business mimics the entertainment business. An issue becomes hot, it dominates the press for a short time, and then it is gone and everyone forgets it. While that may be a fine strategy for think about movies, it is not a good one for analyzing investments. If you don't follow up on your predictions and reassess your analyses, what is the point of doing the valuation analysis in the first place?
Here is one example. On May 18, 2015 Carl Ichan penned an open letter to Tim Cook on the valuation of Apple. Ichan concluded, "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." Well, Apple bought back a bunch of shares and now it is trading at $110. The question is where is Mr. Ichan? Is he buying shares like crazy at $110? Has he changed his mind? Who knows. Those questions are no longer fashionable.