I don't get Apple; Why I like Alphabet more than Apple; How to Evaluate Companies Foregoing Current Profits; Investors Are Usually Wrong; Finland is winning the war on fake news
1) Apple (AAPL) reported third-quarter earnings after the close yesterday and the stock is up 4% today to within a smidge of its all-time high. I don’t get it. Apple is one of the greatest cash cows the world has ever seen, but it ceased being a growth business four years ago.
Since profits peaked in the fiscal fourth quarter (calendar third quarter) of 2015, trailing 12-month revenue has grown a mere 10.2% (2.6% compounded annually) and operating income has declined by 9.6%. Yes, earnings per share have risen 27.8%, thanks to the corporate tax cut and huge share repurchases that have shrunk the share count by 18.3%…
But if I’m going to pay 19 times earnings for a tech stock, I want to see material growth of both the top and bottom lines. That’s why I continue to like Alphabet (GOOGL) more than Apple, as I discussed in my e-mail on May 1.
2) Speaking of growth stocks, in today’s video, How to Evaluate Companies Foregoing Current Profits (7 minutes), I share my thoughts on how to value companies like Salesforce (CRM), Netflix (NFLX), and Amazon (AMZN) that were reinvesting so heavily in growth that they were reporting few, if any, current profits.
3) Some scary statistics – and good advice – here: Investors Are Usually Wrong. I’m One of Them. Excerpt:
Forget about getting everything right. Most people are so consistently wrong that merely avoiding major errors is enough to set you apart from the pack…
The Dalbar data leads to the inescapable conclusion that most investors, this one included, are bunglers: We panic and exult at the wrong moments, impairing our chances of success.
As Richard Bernstein, a former chief investment strategist at Merrill Lynch who now runs his own firm, told me, “What’s shocking is that simply by investing, most people actually made themselves poorer.” He added, “They’re just shooting themselves in the foot, over and over.”
… If people are going to successfully hold investments for the long haul, they need a high degree of discipline, according to Mr. Bernstein. “You really need to put the money in a lockbox, of some sort,” he said, “and not give in to the temptation to do something that you think is smart — and that will probably turn out to be stupid.”
4) This article caught my eye… Finland is winning the war on fake news. What it’s learned may be crucial to Western democracy. Excerpt:
The course is part of an anti-fake news initiative launched by Finland’s government in 2014 – two years before Russia meddled in the US elections – aimed at teaching residents, students, journalists and politicians how to counter false information designed to sow division.
The initiative is just one layer of a multi-pronged, cross-sector approach the country is taking to prepare citizens of all ages for the complex digital landscape of today – and tomorrow. The Nordic country, which shares an 832-mile border with Russia, is acutely aware of what’s at stake if it doesn’t.
Finland has faced down Kremlin-backed propaganda campaigns ever since it declared independence from Russia 101 years ago. But in 2014, after Moscow annexed Crimea and backed rebels in eastern Ukraine, it became obvious that the battlefield had shifted: information warfare was moving online…
As the trolling ramped up in 2015, President Sauli Niinisto called on every Finn to take responsibility for the fight against false information. A year later, Finland brought in American experts to advise officials on how to recognize fake news, understand why it goes viral and develop strategies to fight it. The education system was also reformed to emphasize critical thinking.
Best regards,
Whitney