Is Apple a good company to invest in? Ask many people this question, and you will hear a more or less sophisticated discussion of
Apple’s current and likely future product line
the quality of its designs and technologies
the talent of the leadership of the firm
the impact that digital transformation is having on the world.
Quite often, what you won’t hear mentioned is anything about its current valuation.
Whether or not Apple’s shares are good to buy depends on how much you have to pay for them.
If you could buy Apple shares at $1 each, you should certainly do so.
If you could only buy them at $1m each, you should definitely not buy them. Buying them at that price is nothing more than a gamble that someone as ill-informed as you will be around at the moment you want to sell them to take them off your hands.
Apple is certainly a remarkable company, but nothing about its current performance justifies a $1m share price. Today, the price is $320. And yet huge amounts of casual discussion, and more serious journalism, will ventilate at length over whether the shares are a good buy, without any investigation of the relationship between what Apple needs to accomplish in the coming years to justify the current valuation, and what recent history suggests it is likely to achieve.
Investors in infrastructure would not dream of thinking in these terms. Nor would managers in oil and gas companies, or miners. They can articulate clearly the linkage between the price at which they would be willing to acquire an asset, or dispose of it, and their expectation of the future performance of the property.
Pier Review will bring these disciplines to the examination of well known companies.
What next?
If you find this analysis interesting, you can sign up to have others like it delivered to your inbox several times a week.
Share Pier Review with interested friends.