Carl Icahn wants more cash from Apple (Nasdaq:AAPL) and we all know Apples has it. Apple just recently started paying a dividend and perhaps is on the path to attracting dividend oriented investors.
What’s the game plan?
Tim Cook privately may agree that they have a lot of cash hanging around. Much of it has not been brought back to the USA because of that stupid tax law. But Apple has brought some back and paying the tax so it looks good in Washington DC. This may have been the deciding factor about why Carl Icahn decided to take a run at Apple. Tim Cooks big problem is that he cannot appear to be bullied by Carl Icahn. Carl Icahn has been less than gentle with some other prey. No one wants to see this at Apple.
Other companies who have attracted Carl Icahn’s have decided to come to terms and get it behind them. How much share repurchase will satisfy Carl Icahn? Will Apple even want to substantively respond to Carl Icahn’s suggestion. Apple shares are low so this is the best time to do a share repurchase. Value is created by buy low sell high.
Here are a few things Apple can do to thwart Carl Icahn and still take care of the shareholder.
- Increase the dividend rate and claim that they are returning capital to investors “Olde School” Carl Icahn has short-term objectives but a higher dividend yield in a rising interest rate environment can be argues as wealth enhancing.
- Introduce new products, get the Apple Hype Machine cranked and watch the stock soar to the heavens.
- Actually increase the share buy back some but not in the range that Carl Icahn wants.
- Let shareholders know what the true tax cost of repatriating funds on shore really is. Will the tax cost become prohibitive and make Carl Icahn look greedy, greedy, greedy.
Here are a few things Carl Icahn and supporters need to thing about.
- If the market crashes this fall should Apple be spending treasure to drive up prices that will not move upwards. Let the stock drop and then rebuy.
- Carl Icahn is 77 years olde (DOB Feb 16, 1936) I know he’s a doctor by training and looks fit but the original factory parts are near the end of their useful life. Death or severely debilitating medical condition is a high probability if you’re a life insurance actuary. This is not insurable.
- What if Apple just says no? What you gonna do? Sell the stock in perhaps one of the greatest entry point opportunities of the stock history. This is Apple. Investor opinion will not conclude management needs a shake up or something else. Carl Icahn simply wants to wet his beak and maybe Apple just doesn’t need to do anything just because its Carl Icahn.
- Strategic counter moves by Apple such as a major acquisition or two which reduces cash and makes his suggestions seem foolish.
Apple has enough cash to buy a huge aircraft carrier. Rename it Carl Icahn and then just sink it. Just for fun. And maybe they should.
Tim Cook needs to stride out of this with reputation more than intact. Enough Wall Street Bankers are more than capable of giving him a tutorial in financial cash management.
George Gutowski writes from a Caveat Emptor Perspective. Follow him on Twitter @financialskepti . He is pretty sure some aircraft carriers are for sale.
Carl Icahn on the now very famous Twitter feed follows only 5 individuals all of whom are respected Business Journalists. They are
Nathan Vardi Forbes Reporter @nathanvardi
Steven Bertoni Forbes Associate Editor @StevenBertoni
DAVID FABER CNBC @davidfaber
Trish Regan Anchor & Editor at Large BloombergTV @trish_regan
Scott Wapner CNBC @ScottWapnerCNBC
Communication is nuanced process. These five scribes are all reputable and work for reputable news organizations. Carl Icahn has close to 53K of followers. In aggregate these five have 86K in followers. The Forbes guys are really low. Print vs television maybe? So the relative followers on Twitter has nothing to do with it. So watch and listen and see if these guys are just newshounds or can they be played in some fashion.
George Gutowski writes from a caveat emptor perspective. He can be followed on Twitter @financialskepti To the best of his knowledge Carl Icahn does not follow him on Twitter. But if you want you can follow Carl_C_Icahn. I’m sure every Barracuda class action lawyer is.
The biggest scripted annual meeting starts dancing right about now. Berkshire Hathaway (NYSE:BRK.B) is about to engage in what maybe the worlds largest and best attended annual meeting. As the market starts its annual adulation let us think about why a stock goes up or down.
Answer: Supply and Demand. The more investors want to buy they create demand and the price goes up. The reverse is also true.
So right now we have a media frenzy and love fest. Something similar to what Apple experienced not that long ago. But when everyone seems very positive where is the remaining buying pressure to come from.
In the past twelve months BRK.B has appreciated nicely by about $25 @share. The short position has grown smartly to 1.2% of float. At something just north of $100 @ share the shorts have balls. Money flow is 2.99 which indicates short-term bullishness.
Berkshire Hathaway is not a deep pond for the professional short. The short position has moved as high as 1.5% and bottomed at just north of 7% all in the past five years. In the past year the short position has fluctuated between 0.8% and 1.5%.
Warren Buffett will come with his annual speech that he is looking for acquisitions. Very little will be officially said about succession policy. The age clock will continue ticking.The primary reason for owning Berkshire Hathaway has been Warren Buffett. Soon the unifying narrative will be ripped asunder.
If you are wary enough to believe in the law of unintended consequences? If you believe in long tail risk and Black Swan Events then consider the merits of the short position. The stock will be bequeathed to charity (Buffett’s part that is) No dividend is paid. charities need income and funds to operate.
The shorts smell the opportunity. Uncertainty will prevail until the leadership stabilizes; if it ever does. Just look at Apple and the ongoing Steve Jobs vs Tim Cook conversation.
George Gutowski writes from a caveat emptor perspective.
Image via CrunchBase
I check my iPhone app for stock markets. You know the pre-loaded one that Apple (Nasdaq:AAPL) gets from Yahoo (Nasdaq:YHOO). I just wanted a quick peak while I’m on my way to do something else. Its 12:44 ET and the graph is updating to 13:15ET. This is supposed to be a 20 minute delay. Or is my iPhone screwed up. Tim Cook please investigate immediately.
Disclosure: George Gutowski writes from a caveat emptor perspective. I do follow the stock market and value accurate information. I have no positions in any stocks mentioned in this post. I have no intentions of initiating new positions within the next 72 hours. I am currently over-anxious about my iPhone.
Image via CrunchBase
Steve Jobs of Apple (Nasdaq:AAPL) finally resigned supposedly on his own terms. The Hewlett-Packard (NYSE:HPQ) Touchbook rout just icing on the cake. Everyone cannot say enough great stuff about Steve Jobs and that is the problem for Tim Cook.
Machiavellian thought counsels to not follow popular princes. Their legacy is powerful and you will be constantly compared in an unfavourable light. It is better to follow a bad prince well just like Steve Jobs did about 13 years ago. every hiccup will be Tim Cook’s fault. Steve Jobs had hiccups and worse but it was OK. He was Steve Jobs.
Tim Cook undoubtedly is an excellent choice in everything except timing which no one can control. The Apple mystique will change and for high-tech that’s a very good thing.
Disclosure: George Gutowski writes from a caveat emptor perspective. I do own iProducts. I do not have positions in any stocks mentioned in this post. I have no plans to initiate new positions within the next 72 hours.