[boombust]

While you are right, I think the parent's idea if that with a large enough sample, even if every actor is making decisions randomly, you will get actors that will just crush it.

I mean Warren Buffet invested in Apple about a year ago based on the idea that they have a sticky brand and went so far as to say that iPhones were underpriced (which is just flat out wrong given how poorly they sold relative to predictions). . .and it turned out to be a terrible investment decision (so far). While I find it hard to believe that WB is all luck I think you can't dismiss that argument entirely based on his track record, no matter how successful.

[adamlett]

Warren Buffet would be the first to tell you that how the market prices an investment on any given day, has very little to do with the intrinsic value of that investment. Just because Apple went down relative to when he invested, that doesn't mean it was a bad investment. Markets go up and down in unpredictable ways. As they say, in the short term the market is a voting machine, in the long run it's a weighing machine.

By this time, I think it's become clear that Apple's disappointing results were entirely caused by the macroeconomic conditions in China and nothing else. Certainly not because of increases in their product prices like you speculate.

[boombust]

I am not an active investor. I do not claim to know as much as someone like WB. However, what you have just explained is all pretty obvious.

To buy Apple's explanation that most of their disappointing quarterly earnings were as a result of Chinese macroeconomic conditions is frankly being generous to them. Just focusing on the iPhone, it is a muddled offering where successive iterations don't stand out from the next as they did in previous generations. Now, this isn't just an Apple problem. Innovations in smartphone technology have slowed down across all handset makers. However, until Apple shows that they can successfully increase their service offering to get more money out of their users and are able to charge more for handsets then opportunities for growth seem pretty limited in that space. Moreover, when I see that apple is increasing credit on trade ins for newer iPhones a few months back. . .I take that as a sign that consumers see little value in upgrading. Not saying Apple is doomed but they don't show signs (to me) that they are on the path for growth.

My comments on the price of iphones was from misremembering WB comments about them 6 months ago. He said that the iPhone was underpriced but that Apple could not increase prices due to competition. I thought he made a statement saying he believed that prices should be increased on the iPhone range. I never claimed that their stagnant sales are from product prices, rather that worldwide sales demonstrate that the price should definitely not be higher than it is currently (unless they improve the product dramatically).

[adamlett]

However, what you have just explained is all pretty obvious.

I was just addressing your notion that the investment was "terrible".

To buy Apple's explanation that most of their disappointing quarterly earnings were as a result of Chinese macroeconomic conditions is frankly being generous to them…

But we don't have to "buy" their explanation, because we can just look at numbers. Apple has released their quarterly results, and the iPhone grew in every region except China. Yes, growth has slowed, but this is not a new trend and is not the reason that this quarter has disappointed investors.

until Apple shows that they can successfully increase their service offering

But they have shown that! Service revenue grew by a very healthy 19% last quarter (relative to the same quarter yesteryear).

when I see that apple is increasing credit on trade ins for newer iPhones a few months back. . .I take that as a sign that consumers see little value in upgrading

Why would you look to signs, when you can look at the numbers? There is no reason to speculate when Apple has released the results.

Six Colors has a lot of pretty graphs and numbers if you're interested: https://sixcolors.com/post/2019/01/apples-dramatic-q1-2019-r...

[smileysteve]

On Apple; on a 1 year timeline APPL beats the S&P 500 by 5%. But I don't think Buffett measures his investments on a 1 year timeline; and to be honest to your comment, he made the underpriced comment on Aug 31, 6 months ago.

"I do not focus on the sales in the next quarter or the next year," he said. "I focus on the ... hundreds, hundreds, hundreds millions of people who practically live their lives by it [iPhone]."

Apple does continue to boost services income, keep cash on hand, pay dividends, and do share buybacks, all with a P/E below major utility stocks -- things Buffett traditionally considers.

Disclaimer. Apple Shareholder

[boombust]

I misremembered his comment on iPhone prices. He just said that they are undervalued relative to their utility. I thought he made a comment that Apple should look to increase iPhone prices, which, as he admits, would be a terrible move.

Listen, I was just trying to make an argument that even WB can misjudge a situation. It was not a convincing argument because half the example I used was not correct. Timing wise, buying apple stock in early 2018 before concerns about Apple being able to grow and stoke the hunger for their consumers to upgrade is not ideal. Hindsight is not a necessarily fair way to judge his decision because as you mentioned his horizon goes far beyond a year.

Maybe my personal bias is coming through because I just don't see it as such an exciting brand anymore and I struggle to see where they will find new areas for growth. Whereas 10 years ago I was looking to upgrade my laptop/smartphone every 1-2 years, now I've got my iPhone 7 and my 2013 macbook air and I'm sticking with them until they fail because nothing that Apple offers makes me go 'I want that'.

[smileysteve]

Yeah, the example was a pretty poor one. Your quote about pricing wasn't far off from what Apple was trying to do; I heard somebody say they're realizing that the smart phone market is saturated and seeing how high they can pump the price before it matters; and you and I both think they found it.

> I just don't see it as such an exciting brand anymore

The stock market also doesn't see it as exciting anymore. The market has had this view since Steve Jobs was alive; where Apple's P/E places it below value and dividend stock (it trades at half the multiple of Duke Energy). In order for you, or Warren Buffet to think Apple is a good value investment, it only has to be ~1/2 as exciting as Microsoft or Duke Energy.

[hopler]

Buffet also refused to invest in computer/Internet companies for many years because he knew he didn't understand them.

[stakhanov]

Well, if you take the random-chance/selection-bias as the core of a snowball and add to it the various mechanisms which mean that the game of asset management is rigged in favour of the manager, then I think there is something to this. For example, asset managers get a part of their income from a MANAGEMENT fee which is a percentage of the assets under management, that they collect regardless of whether the fund actually does well. If you get a few bets right, make a name for yourself, more people will be putting money into your funds, and it all turns into a self-fulfilling prophecy.