Member access

4-Traders Homepage  >  News  >  Business Leaders  >  All news

Business Leaders

Latest NewsCompaniesMarketsEconomy & ForexCommoditiesHot NewsMost Read NewsRecomm.Business LeadersVideosCalendar 
HomeAll newsMost read newsBusiness Leaders Biography 
Warren Buffett
Country of residence : USA
Birthday : 08/30/1930
Linked companies : Berkshire Hathaway Inc. - West Corp - Citigroup Finance Canada Inc

Apple Investors Demonstrate Valuable Lesson in Discipline

01/04/2014 | 09:36am US/Eastern
Recommend:
0

There are two things every investor can count on as it relates to Apple (NASDAQ: AAPL  ) : a never-ending supply of rumors and some of the most ardent supporters of any company, anywhere, regardless of industry. In fact, for the first time in the 14-year history of Interbrand's Best Global Brands list, venerable Coca-Cola is no longer the most valuable brand in the world; that title now belongs to Apple, with a whopping $98.3 billion brand value.
It's that kind of brand loyalty every company dreams of, but it can also cause problems for investors. How? Because too often, particularly in the short-term, a company's share price can shoot up on little more than rumors and emotionally attached shareholders, ignoring what should be at the heart of every Fool's investment decision: fundamentals. And that's what makes the discipline of iFans following the China Mobile (NYSE: CHL  ) deal so impressive and exemplary for all investors.
The deal Rumors of a partnership between Apple and China Mobile have circulated for years, but they really gained steam over the past several months. The deal is potentially big for Apple's bottom line for a couple of reasons. For one, with 763 million subscribers, China Mobile is the largest wireless carrier in the world. And with its estimated penetration of only 35 million to 40 million iPhone customers, that leaves more than 700 million potential iPhone customers.
Another upside to the China Mobile agreement is that the region is already third, behind only the U.S. and Europe, for Apple. Apple could gain significant market penetration in a hurry. There's also the not-insignificant matter of China being the largest wireless market in the world, so you can see why iFans would be excited.
A dose of reality Given Apple's rabid user and shareholder base, coupled with what could be a boon to smartphone sales, it would have been no surprise if iFans had carried Apple's stock past $600 per share. Frankly, that's what I had expected to happen. But they didn't. Sure, there was a slight pop of about 3.5%, but even that has eased some from the late-December announcement.
Interestingly, it was the industry analysts that were overly giddy following the news, not investors. Many analysts tried to incite a hope-based rally, but Apple investors weren't biting. For example, some analysts began tossing figures like 20 million and 24 million iPhones sold this year to China Mobile customers. Possible? Yes, but hardly a slam dunk.
And those huge sales estimates, said the analysts, would translate to more than $3.5 billion in profit this year on revenue approaching $13 billion. Naturally, these same analysts pushed their target prices up as a result of the estimates -- some as high as $700 a share from $650 a share based on expected China Mobile sales results.
Why Apple investors didn't bite China Mobile's presale iPhone order estimates of about 100,000 units over the first two days didn't impress, especially compared to the 9 million 5s and 5c models Apple sold when the devices first rolled out in September (in multiple countries, that is). But the dicey preorder results aren't why investors were right to hold off. There are fundamental reasons.
Instigating a momentum-driven share-price pop based on hope when questions remain would have been a mistake. For example, how much of the cost is China Mobile willing to subsidize? Are sales estimates of 20 million to 24 million this year realistic? Why not wait until the iPhones are actually available later this month to get a better sense of user adoption? There are also questions surrounding the actual number of China Mobile's 3G customers, a key demographic for an iPhone upgrade.
To the credit of Apple investors, many had the wherewithal to wait until a few questions are answered before jumping on their beloved iBandwagon, and that's a lesson in discipline every investor should take to heart.
Investing tips from the Wizard Warren Buffett has made billions through his investing and he wants you to be able to invest like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from The Motley Fool. Click here now for a free copy of this invaluable report.

© Al Bawaba Ltd., Acquiremedia 2014, photo: Maxppp
Recommend :
0
React to this article
Latest news about Warren Buffett 
NetJets wins approval to launch China service
09/23 - Berkshire Hathaway CEO Warren Buffett listens to a shareholder at the Berkshire-owned Borsheims jewelry store where Buffett was selling jewelry as part of the company annual meeting weekend in
Governor Snyder, Mayor Duggan, Goldman Sachs Celebrate First Graduation of 10,000 Small Businesses in Detroit
09/19 - DETROIT, Sept. 18 -- Gov. Rick Snyder, R-Mich., issued the following news release: Today more than 60 Detroit and
Bloomberg, Buffett at Detroit small business event
09/18 - DETROIT — More than 60 local business owners graduated Thursday from Goldman Sachs' 10,000 Small Businesses program and were cheered on by some high-profile people — former
Wells Fargo CEO Concerned About Warren Buffett’s Sodium Intake
09/17 - Stumpf, responding to a question about Buffett at the National Press Club in Washington today, said the world's third-richest person dined on a T-bone steak cooked medium rare, a side of chicken parmigi
Advertisement
Popular Business Leaders 
Paul Allen Mukesh Ambani Bernard Arnault Luc Besson Vincent Bolloré Martin Bouygues Richard Branson Warren Buffett Steve Case Benjamin De Rothschild Barry Diller Bill Gates Philip Green Carl Icahn Steve Jobs Li Ka-shing Peter Lynch Maurice Lévy Lakshmi Mittal Rupert Murdoch Jean-charles Naouri Xavier Niel Nelson Peltz Zong Qinghou Jim Rogers Johann Rupert Naguib Sawiris Carlos Slim George Soros Donald Trump
A-Z Business Leaders
Most Read News 
'Bond King' Bill Gross quits Pimco for Janus
5 days ago - NEW YORK (Reuters) - Bill Gross, the bond market's most renowned investor, quit Pimco for distant rival Janus Capital Grou...
SEC probes Pimco chief Bill Gross's ETF bond fund
7 days ago - (Reuters) - U.S. regulator the Securities and Exchange Commission is investigating whether bond fund manager Pimco inflate...
How Bill Gross became too hot for Pimco to handle
5 days ago - NEW YORK (Reuters) - Bill Gross' abrupt departure from Pimco, the giant bond firm that he co-founded more than four decade...
Oracle's Ellison took smaller pay package in fiscal 2014
09/23 - (Reuters) - Oracle Corp's  (>> Oracle Corporation) Larry Ellison, who is stepping aside as chief exec...
First non-Murdoch paper to admit intrusive practice Alan Yentob, Sven-Goran Eriksson among claimants
7 days ago - The publisher of the Daily Mirror and Sunday Mirror is to pay compensation to 10 victims of phone hacking, including form...
More news
Dynamic quotes  
ON
| OFF