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Apple Investor Day: Does It Have to Kowtow to Value Investors?

Tuesday, 26 Feb 2013 | 3:58 PM ET
Nick M. Do | E+ | Getty Images

Stocks are up as Bears as not yet in control of the narrative.

There were no surprises from Bernanke, though he did give a rather spirited defense of QE and low interest rates. However, we did sell off going into a weak European close; our markets rebounded after that. European selling was the likely factor.

Buy the dips? Maybe. Investors have been conditioned to do that--and they're doing it again today. Volume is only a bit lighter today on the upside as it was yesterday on the downside. That's a good sign.

Looks to me like new longs are entering the market--the guys that missed the rally. A five percent pullback? Maybe, but if that was happening you would think this is a good day to start a trend, no?

Home builders are soaring as January new home sales posted its biggest gain in two decades, and house prices continued to increase in December, according to Case-Shiller, up 6.8 percent on a year-over-year basis. Building material stocks like USG (USG) and Masco (MAS) are strong, as is Whirlpool (WHR).

Retail stocks are up on better-than-expected earnings from Home Depot (HD) and Macy's (M).

Managed care stocks like WellCare (WCG) and Humana (HUM) are down on concerns that the looming sequester will result in Medicare cuts.

The Apple (AAPL) Investor Day tomorrow: do they have to kowtow to the value guys?

The stock is spiking midday on speculation it will make some announcement to return cash to shareholders, or split its stock.

OK, so AAPL is no longer a hyper growth stock, and the hyper growth guys have abandoned it. But does it have to kowtow to the value guys? They're certainly circling around it. That's why there's all this talk about "returning money to shareholders."

Yeah, I do get it: with AAPL stuck in moderate growth land, promise the value guys a, say, four percent dividend. That will attract them and push up the stock.

But that's all these value guys want: a consistent commitment to return cash. Value guys don't want acquisitions, they don't want bold moves. They want cash returned to them on a consistent basis.

A bigger dividend or a stock buyback is more likely than implementing Einhorn's proposal, or at least some announcement they will return some percentage of their free cash flow each year.

One other point: a large percentage of that $137 billion in cash is offshore. So they are either going to have to repatriate it and pay tax, or borrow the money to pay a bigger dividend or buy back stock.

Here's to a radical idea: let's focus on growing market share. Like how it will make a deal with China Mobile (it has none, supposedly because the subsidy costs for China Mobile are too high), and how to get more meaningful penetration in emerging market countries (many analysts have recommended lowering the iPhone price, or producing a cheaper iPhone).

How about a new product launch? Samsung is shipping the Galaxy S IV this spring, supposedly. How about an iPhone mini? OK, call it the iPhone 5s. Whatever. Sell it cheap.


By CNBC's Bob Pisani

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  • A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

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