John Buckingham, AFAM, and David Rolfe, Apple shareholder, discuss Carl Icahn’s suggestion to push Apple for a $150 billion buyback. I am in Icahn’s camp on this one, says Rolfe.
Blue Eagle Capital Partners: Long Thesis For This Lending Stock
Blue Eagle Capital Partners was up 17.7% net for the third quarter of 2020, bringing its return to 49.1% for the first nine months of the year. During the third quarter, longs contributed 28.15% to the fund's performance, while shorts subtracted 7.36%. The S&P 500 was up 8.93% for the third quarter. Q4 2020 hedge Read More
owns about 900,000 shares. guys, good morning. — especially when you think about where we are on the interest rate spectrum. when they did the $60 billion offering, they went out and borrowed 2.4% for a big chunk of the debt and retiring stock that was — had a dividend of 2.8% at the time. i mean, that’s alchemy, and now, are they going to agitate it that they’ll do it? we have low interest rate, they should be buying back a lot of stock. john, you said that’s financial alchemy, that’s fantastic, i forget the — why is financial alchemy — look, we can talk about the fact this would overnight, as carl describes, mean a 33% increase in earnings per share, 33% increase in valuation. but again, it’s alchemy. there’s not necessarily something — you know, why not have it be based on the success of a new product? is this not a sign that apple strategically doesn’t see another use for this money? why not do it all? why not continue to invest in r&d? this company generates fantastic cash flow every quarter. they could certainly finance the debt on doing a big buyback. so, you know, i think it’s a brilliant idea. with interest rates so low, and this is part of the reason equities are so attractive, companies can borrow it for next to nothing and buy back stock and grow earnings. ibm’s done it. a lot of companies have done it, and there’s nothing wrong with it. no, you could argue that’s why we’ve had the year we’ve had. david, what’s your take, are you happy to have icahn involved or not? yeah, i really am. i think tim cook needs to channel his inner-henry singleton of teledime fame. it’s rare you get a chance to buy back stock at such a cheap price to be this accretive. and i think some of the skeptics who say, well, keep 100, 150 billion on the balance sheet to stay relevant for the next technology that may come down the road, if you happen to miss it, well, that assumes that you could deploy that much into a new, single technology, and those are typically negotiated transactions, and there’s a long history that those aren’t shareholder-friendly type deals. i’m in. i’m definitely in icahn’s camp on this one.