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.]

43 Comments

  1. 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.

  2. 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?

  3. So why dosnt it rise on a potential “sensible capital allocation” ?

    I think allot of Apple investors after Shares reached 400 was stupid investors. We have now got rid of most of them. They did not deserve to own Apple in the first place.

    1. And by the way dopey, anyone who can afford to buy a share of stock deserves to own it. It sounds like you have lost a lot of money here. Good. You do deserve that. Fuck you! You clueless arrogant prick!

        1. Talk about another loser? Ya just can’t stay away can ya asshole? How much have you lost anyway Zeke? It’s like a kick in the stomach every morning when you get up isn’t it Zeke? What did you lose? Rent money? Kids college tuition? Speaking of people who don’t deserve to own shares of Apple, tell us again how you bought them all at seven dollars Zeke.

          1. Ha ha ha! “Rent money”? Who would even think of “rent” money but a loser like you? Oh, I forgot, you’re the one who’s rich beyond imagining, who can discern tops and bottoms instantly and with precision, but somehow still feel compelled to attack real investors on an anonymous Apple news forum. You remind me of another self-designated “stock genius” I used to know. He always signed off with a sarcastic “Good luck” too. You aren’t by any chance house sitting in the South of France? Poor bastard got wiped out in a short squeeze/margin call. That’s what happens when you invest with other people’s money.

            Me? I haven’t lost a cent. My most expensive share is still way ahead, and I don’t have to sell because I use real money.

            1. Sure Zeke. I own my home Zeke. And another that I rent out in Burbank. The rent comment was for you Zeke. Rich beyond imagining? No. Never said I was Zeke. Just smart enough to get out at $700 Zeke. South of France sounds pretty nice right now. No Zeke, I invest with my own money. But if you send me your money I’m sure I can do much better than you have. Although I doubt there’s much left after a $250 drop. Good luck.

  4. Why would Apple re-allocate real money to move an imaginary value such as share price or P/E ratio. Apple management has said it time and time again, their goal is to create insanely great product that people want. Profits are a natural by product of that, merely a result. Share value is an even more remote concept and not related to the company’s activity.

    1. Yes, it does appear that Apple is behaving as if its goal is something other than to satisfy shareholders or appease the stock market, or, ludicrously, acknowledge the pundits.

      It observes the inroads being made by competitors and reacts to them only in a very deliberate manner over a period of time, never making reactive announcements as the panicky competition does, and seldom introducing elaborate vapor ware hoaxes to forestall consumer buy in.

      It stockpiles cash as a weapon of mass destruction that is second to none as a deterrent of corporate predation in any form, and as such is capable of fighting on multiple fronts.

      It eschews the wisdom of the pundits in favor of the wisdom of the ancients.

      Its success is due to perseverance in the face of ubiquitous mediocrity and a recognition that what is good will be recognized and embraced by many, despite the distractions of charlatans and noisemakers. Almost alone, Apple trusts the judgement of consumers as people with minds of their own.

  5. Apple does something else really really well besides creating great products people clamor to own: It learns its painful lessons really well; it integrates those lessons learned into every action and strategy they formulate. The first lesson was to not let outsiders take over and destroy the company. The second lesson was don’t lose control of your image by letting others make licensed versions of your gear. The third lesson was don’t let your bank balance go so low you have to sell your soul to your competition. The fourth lesson is well known: “To focus means to say no.” I believe we are now seeing the result of having learned the fifth lesson: Your wonderful ideas and execution on those ideas will not be protected by the US and international laws governing intellectual property.

    What that means to outside viewers of Apple today is a “stall” in innovation. And that’s because Apple is learning how to create incredible barriers to entry in whatever they are cooking up next. Something along the lines of buying up all the aluminum machining equipment so no other manufacturer can create MacBook Air quality machines.

    This war chest gives them incredible latitude to dream big and dream with far fewer constraints. I predict The Next Big Thing from Apple will be lauded as bold by the open-minded, a failure by those still smarting from calling the retail experiment still-born, and cause the stock to tank because Wall Street wasn’t given the money.

  6. “… snapping up Microsoft …”

    Possibly the greatest “MacDailyNews Take” EVER! … Possibly the most contemporary and salient musings regarding Microsoft – in a world swamped in hyperbole.

    I f’n love it … it’s f’n anomalous.

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