Greenwald Wouldn't Bite on Apple
At current prices, Apple is hugely expensive given its vulnerabilities, says the Columbia professor and First Eagle director of research.
At current prices, Apple is hugely expensive given its vulnerabilities, says the Columbia professor and First Eagle director of research.
Ryan Leggio: Talking about high-quality companies, some would put in that camp the Apples of the world, maybe some others. I know you have very distinctive views on competitive advantage. Can you talk a little bit about some...
Bruce Greenwald: Forget views on competitive advantage. If you pay a buck for something that's worth 50 cents, you are losing money right away. The easiest way to do that is to get caught up in the enthusiasm of the moment. The tech bubble in '99, Japan in '89, financials and housing just more recently in 2007. And today, Apple is trading at 50 times earnings and--I don't even know--it may be even more. And though, first, it's going to take a lot of earnings growth to pay that off.
And all the historical evidence says it's a bad mistake to buy those kinds of stocks. Apple may be an exception, but if you think about its vulnerability to competition, it doesn't have the kind of customer captivity that Microsoft has. People buy new cell phones all the time. People buy new computers all the time. People buy new iPods all the time. And they look around when they do that; they want the latest hot thing. And Steve Jobs has been very good at that, but I wouldn't bet on that for the indefinite future.
Not only that, they don't have scale in that market. I mean, Microsoft dominates operating systems. Anybody who wants to compete with them is going to have to spend $3 billion, and lots of luck getting the customers to justify it. People can go after Apple, one piece at a time, with much more available market, and the fixed costs relative to the size of the market are much smaller. So, the ability of Apple to keep people out of that market is, I think, much less than these other franchise businesses, and it is hugely expensive.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals
and individual investors. These products and services are usually sold through
license agreements or subscriptions. Our investment management business generates
asset-based fees, which are calculated as a percentage of assets under management.
We also sell both admissions and sponsorship packages for our investment conferences
and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.