July 21, 2011 – Apple Surprises Again


1) Apple Surprises Again. Wow, and double wow! That's all I can say about Apple's (AAPL) ballistic earnings. Talk about firing on all cylinders and the turbocharger and the supercharger at the same time! Apple is now the world's second largest company and is boasting a positively mind boggling $76 billion in cash, one of the largest hoards in history.

While the 2,000 plus (AAPL) analyst community is scouring the horizon with potential technology takeover targets, let me propose one that most are ignoring: Apple itself. With these kinds of returns on capital, the wisest thing the company can do is buy back its own stock, providing additional returns to its already ecstatic shareholders. Buying anything else would be a step down in quality, profitability, and outlook.

Of course, the company is behaving as if the 2008 crash is coming back tomorrow, hence the huge insurance policy. This is erroneous. I happen to know that it is not coming until next year, or 2013 at the latest. They also have to brace themselves against the prospect that the brilliant Steve Jobs will go on to his greater rewards in the near future.

If the company does take my advice and start a serious buyback program, the stock will soar to $500 in a heartbeat. Then it will require only one more double to get to my long term target of $1,000 a share. I've never been one to pat myself of the back, but in this case I'll make an exception. Every time I put out this prediction, I get tons of abuse from other investors and 100 new subscriptions from happy and hardworking  apple employees. So here it is again in the next piece below, which I originally put out at $250 a share on June 3, 2010.

Hey Steve! I have another idea on how to use your cash mountain. Ever thought about getting into the newsletter business? My returns on capital are even better than yours. I'm only an hour away. Let's talk. Lunch at Stacks in Campbell, maybe? I'm sure they have something vegetarian there.