Legg Mason’s Miller: Apple stock would rise 50% on ‘sensible capital allocation’ alone

“Here’s a fuller idea of Legg Mason manager Bill Miller’s view on Apple (AAPL) — the one that ever so briefly got traders buying the stock again this morning,” Brendan Conway reports for Barron’s. “This is from an excerpt of a forthcoming interview with Consuelo Mack WealthTrack that airs Friday evening at 7:30 p.m. on public television.”

Apple is the Dr. Jekyll and Mr. Hyde of the stock market. It’s the Dr. Jekyll in the sense that they are one of the greatest product innovators creating products that people love and a brand that people love, and they’re Mr. Hyde in their completely idiotic and dysfunctional capital allocation which is the worst probably in the history of corporate America among good companies. So they have $135 billion of cash… Tim Cook said when they had $90 billion of cash, he said it was way too much. They had not possible reason to use it, announced a modest dividend and a modest share buyback that would not even draw down the cash at all, not one dollar. A year later, 135 billion of cash… I think Apple at $450 a share has huge optionality. It’s nine and a half times earnings. It’s going to grow probably 15 or 16 percent this year consensus, 12 to 14 next. Coke grows six to eight percent and trades at 17 times earnings, so if Apple had a capital allocation like IBM or like McDonald’s… McDonald’s pays out 100 percent of free cash flow to shareholders and trades at 15, 16 times. Apple would be up 50 percent on just sensible capital allocation. — Legg Mason manager Bill Miller

Read more and/or watch the video in the full article here.

MacDailyNews Take: Obviously, as they’re not stupid, Apple has some master plan for all of that cash. Whether it be buying up content creators who refuse to play ball, snapping up Microsoft and putting them out of their wretched misery, building flying cars and developing iTransporters, buying Lithuania, or whatever… eventually we’ll find out what Steve told Tim to save up that mountain of cash for.

[Thanks to MacDailyNews Readers “David E.” and “Michael H.” for the heads up.]


  1. If the US will not allow Apple to repatriate foreign cash then pay a special dividend with that foreign cash and let shareholders in the US repatriate the money. All foreign equity holders would make little more.

  2. Just one more idiot saying “I demand my short term gains! Give me money now. I don’t give a damn about any long term use that may grow the company beyond my very limited forward vision.”

    1. Shadowself,
      I agree totally, and to weekend, why is it that the ANAL…yst are mad at Apple for keeping the cash yet the second the margin drops slightly, they say Apple is crashing????

      Apple needs to run Apple and let the ANAL…yst eak by blogging about what Apple should do. And YES most of the money is overseas so until Apple can bring it back at a reasonable rate, its only usable for advance purchase of components, and production build expenses.

      Just a thought,

  3. Isn’t most of their cash tied up overseas? If they bring it in to pay dividends, wouldn’t they have to pay tax on it first? Maybe that’s why they don’t use it?

    1. tbone,
      Spoken like good little Samdung troll. Yeah, spend all that spare cash and live on debt like the rest of us.

      Hoarding is a messy, unfocused way of living where the things you buy are left to decompose and break with out being used. Sounds so UNLIKE Apple. Maybe you have it mixed up with Microsoft. ?????
      Just a thought,

  4. Disagree with MDN’s take (this time). IMHO, Apple has more than enough cash to do whatever it wants (and Tim Cook agreed at $90B), why not bump up the dividend a little?

    While I also trust Apple’s executive team, I also am a shareholder who would value ROI.

    1. I too disagree with MDN. We are now $45 billion past the $90 billion mark Tim Cook spoke of. I do not believe that they have anything in mind to do with that money. I believe it is simply a hold over from Steve Jobs and its as simple as that. Not that having a huge pile of cash isn’t a good thing, it’s great! But this is just too much. It is poor management. And Apple doesn’t do that very often. A bump in the dividend and an increase in the share buyback plan won’t make a dent in that cash reserve. Investors and Wall Street want to see something positive come out of that pile of money. Not that Apple should spend just to get the shareprice bumped up, rather they need to spend it wisely. But spend it. That’s too much to just be sitting there not doing anything. Not helping the company or the investors who own the company.

      1. “That’s too much to just be sitting there not doing anything.”

        This isn’t a troll question, but why is it “too much”? Cook said $90B, but that seems arbitrary.

        “Not helping the company or the investors who own the company.”

        Not helping investors RIGHT NOW. It helps Apple to have that much flexibility to purchase $4 billion worth of material and not even have to worry about the implications on their cash horde.

        1. No company needs that much cash on hand. They don’t need that much for an emergency. And they don’t need that much to stay flexible. And yes, it’s the shareholders who own the company so there’s nothing wrong with helping the shareholders now and in the future. Money spent wisely helps the company and shareholders now and in the future.

    2. Just remember: You’re a shareholder because Apple’s present ii only due to Apple marching to it’s own drummer (aka decisions that made it the Apple you bought into). Now stfu.

  5. All that cash in Tim’s socks will do Apple no good…IMHO Apple should hire Warren as CFO and Wozzie as ChiefFrontfigureOfficer.

    Net result would be: Apple stock at 1000€ in less than a year 🙂 A

    1. That has always been my hope. However, unless they could get coverage in ever spot in the world currently covered by providers supporting Apple’s wireless products, it would be counterproductive. But how about a series of communications satellites that would give coverage in every spot in the world but would only communicate with an upcoming group of new products from Apple? Control every aspect of the experience indeed!

  6. Hey, MDN. You are dreaming. Some might say, delusional. Tim Cook has no orders nor does he have any idea of what to do next. When you realize that and lead your audience here to recognize what countless numbers of people are coming to realize every day, then you will have found traction again in your love for this company. Until then, it’s just wishful thinking, hoping and finger crossing = status quo.

    1. I saw that on CNBC. It was a writer for Vanity Fair magazine. She seemed a bit clueless. She was a not grilled on her fundamental comments. They seemed a bit presumptive. And she clearly stated that she did not say that Apple would drop to $200 per share. Never say never, but I don’t believe Apple will see $200. But it clearly needs a kick in the ass. The PR machine could do a little more than send out a few press releases. And that’s all they have done lately, although that was noted to be a big increase over the past! Gotta do more than that guys. You can dream and plan and innovate all you want but you better get the word out there because competition has arrived. And they’re not going away. So the PR department needs to crank it up about 10 notches. Bing smug and stoic was great when there was no competition but that was yesterday. Not today.

  7. Buying up content creators is absolutely a good thing to do. Here’s why. Any owners of “dumb pipes” or other distribution systems understand that people are not loyal per se to them. If you could get a better service or what you want from another provider you’d go in heartbeat. That’s why they lock you in for two years (or pay a hefty penalty). CONTENT is what people seek for TELEVISION. INFORMATION and UTILITY is what they seek for the web in general. How they access either is less important. Apple could easily buy major chunks of Hollywood if not all of it including back catalogs if they so chose. That won’t happen but anyone with eyes can see Amazon, Netflix and Google all venturing into original programming. Why? Because content is what people want. Not the pipe or mechanism that delivers it. The massive server farms under construction in North Carolina, Texas and Oregon by Apple are not there to store your 5 GB cloud content or serve up iTunes. They are there to serve up VIDEO content (and more of course). Apple owns the content, and the on demand system to deliver it, you buy it. Iron Man FIVE anyone?

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