Another Five Years

Five years ago, a year and a half after Steve Jobs' death, Apple's stock was in the doldrums. A post from April, 2013:

There's no question that the past year has dissipated the aura of coolness that surrounded the ownership of Apple products or Apple stock. Last year's "new" product releases represented incremental improvements--some features were impressive, to be sure---but, alas, the revolutionary, industry-changing devices that were supposedly in the pipeline when Steve Jobs died appear to be a figment of the biographer's imagination.

Your humble observer is a long-time holder of AAPL and, like other investors, has been disturbed by the stock's 28% drop in price over the past year and 42%(!) fall from the $705 all-time high of last September.

When the above lament was written, AAPL was selling for $406.13 per share, the equivalent of $58 after 2014's 7-to-1 split. Over the next five years Apple has tripled to close at $188.59 last Friday. The biggest company in the world has substantially outperformed the S&P 500 and NASDAQ indices (see chart below) during that period.

Before the May 1st earnings announcement the analysts were saying the same thing as they did in 2013: Apple is a hardware/iPhone company, it hasn't come up with anything revolutionary since Steve Jobs died, and its growth prospects are lower than those of tech giants Google, Amazon, and Facebook.

As expected, iPhone sales did fall from the December quarter, though they did manage to increase from the same quarter last year. However, three bright spots more than made up for any disappointment from the iPhone.

Cash returned to shareholders.

Apple’s $100 billion share-repurchase plan is the largest ever announced by a U.S. company, according to data from research firm Birinyi Associates. Apple said its board also approved a 16% increase in its quarterly dividend. That put it on track to spend $14.82 billion a year in dividends, making it the largest dividend payer, according to S&P Dow Jones Indices.

Services revenue.

The services business has become one of Apple’s biggest growth engines, with revenue in its last fiscal year rising 23% to $30 billion. Apple aims to lift that number to $50 billion by 2020.

The company has 1.3 billion iPhones and other devices in active use and earns an estimated $30 per device on music subscriptions, app store purchases and other services, according to Morgan Stanley, which expects services to account for about 60% of Apple’s revenue growth over the next five years.

Berkshire Hathaway bought more shares.

(CNN Money image)

75 million--That’s how many more shares of Apple that Warren Buffett bought in the first quarter of this year, adding to the almost 170 million shares that Buffett-run Berkshire Hathaway owned at the end of 2017. “It is an unbelievable company,” Buffett said in a CNBC interview, and investors responded by pushing Apple up about 4 percent Friday, closing at a record $183.83.

Apple's still growing, and its cash-generating ability has risen with the 2017 Tax Cut and Jobs Act. If the 87-year-old Warren Buffett can buy more shares, then I'll show a little faith by holding on to mine for another five years.