Are you repeatedly kicking yourself for not buying Apple in the wake of the technology bubble burst and every subsequent sell-off since then? Cheer up. The company didn’t either.
Apple, the company, has not repurchased a single share of stock since 2000, missing a 4,216 percent increase in the share price that could have even further boosted its $50 billion cash hoard, according to data compiled by Goldman Sachs. The stock hit a new all-time high today after Goldman recommended buying the shares anyway.
“Apple’s management and board have steadfastly refused to part with this cash hoard,” said Goldman Sachs analyst Bill Shope, in a note today. “Our sense is that the company will eventually issue this cash, probably in the form of a one-time dividend, but Apple’s history suggests investors should not count on such an event in the intermediate term.”
While it’s hard to complain about Apple’s success over the last decade, it does stand out among tech companies in not repurchasing any shares at all. Last week, Intel resumed its planned $5.7 billion buyback. IBM authorized a monster $10 billion buyback at the end of October.
The Apple bulls will argue that the executive team is not focused on playing stock market games, instead they have been building a new technological platform made up of iTunes, the iPod, the iPhone and the iPad.
“Funding innovation and organic growth is not cheap,” said Joe Terranova, Virtus Investment Partners chief market strategist. Terranova, also a ‘Fast Money’ trader, notes that the company is also spending money improving efficiency behind the scenes, boding well for a pick up in margins.
Don’t feel too bad for the executives though, as they likely have been showered with options over the years. However, the last outright purchase of shares by an insider was by one-time Apple director Eric Schmidt in 2006. The Google CEO bought 10,000 shares at $69.79.
Still, it’s hard to believe that Apple is sitting on $50 billion in Treasuries and corporate bonds yielding only 0.11 percent and not thinking about giving some of that back to shareholders.
“It’s difficult to argue that this is an appropriate use of cash, and investors have consistently argued for a more aggressive dispersal or investment of this cash,” wrote Goldman’s Shope.
Some observers feel a bit stronger about this missed investment opportunity by Apple over the years, saying that it doesn’t bode well for future capital deployment decisions by Jobs and the rest of the executive team if the innovation cycle ever slows.
“Apple only invests in Steve Jobs’ ego,” said Dan Nathan, options trader for JAK Securities and an ‘Options Action’ contributor. “They have made a monumentally horrible decision on this cash management issue, and believe it or not it has cost investors in a serious way. Their arrogance will be the thing that brings them back down to the stratosphere with every other once dominate tech company.”
* For the best market insight, catch 'Fast Money' each night at 5pm ET, and the ‘Halftime Report’ each afternoon at 12:30 ET on CNBC.
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Trader disclosure: On December 13, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Adami's wife works at (MRK); Terranova Owns (UPL), (C), (PEP), (OXY), (GS), (NKE), (VRTS); Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman's firm is long S&P puts; Finerman's firm is long Russell 2000 puts; Finerman Owns (AAPL); Finerman's firm owns (ARO); Finerman Owns (BAC); Finerman's firm owns (BBY); Finerman owns (GOOG); Finerman owns (JPM); Finerman's firm owns (JPM) and (JPM) leaps; Finerman's firm owns (THC) calls; Finerman's firm owns (GLNG); Finerman owns (GLNG); Finerman owns (GOLE); Finerman's firm owns (GOLE); Finerman's Firm Owns (OCR); Finerman's Firm Owns (GLW); Finerman owns (CVS); Finerman's firm owns (CVS); Weiss Owns (FNSR), (FRO), (FAS), (INFN), (OCLR), (SWC), (QCOM), (MXIM), (VZ), (DVN), (HK), (COP)
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