Bad Apple?

Featuring Colin Gillis

Colin Gillis, director of research at Chatham Road Partners, discusses the looming problems he sees for Apple shares. He explains his analysis, and lays out the trade, in this interview with Justine Underhill. Filmed on May 30th, 2018.

Published on
1 June, 2018
Topic
US Economy, Trading, Technology
Duration
10 minutes
Asset class
Equities
Rating
91

Comments

  • TM

    Todd M.

    7 6 2018 03:16

    2       0

    They are not just buying back billions - they are buying back $100 B of tock. Now I am no Kool Aid believer in the market, but if the riskiest possible stock to short would be Apple. A Tsunami of buybacks... shorting this is crazy!

    His arguments here are just deflections of the core.

    That said - the trade segment is very well presented (could care less that I disagree with his point) - well done format... much improved!

  • NH

    Nigel H.

    5 6 2018 22:05

    2       0

    Even if he's right, it's a poor trade idea to short a leading stock in a leading sector.

  • AB

    AJ B.

    4 6 2018 14:30

    4       0

    All the same arguments made a 100 points ago. I'll continue to hold.

  • CP

    Christopher P.

    4 6 2018 08:03

    2       0

    He’s not placing any capital at risk and is airing a speculative bias with very little to no supporting fundamentals. Warren Buffett bought a huge chunk of Apple’s stock because the company meets all of (or most of) his investment tenets. Strong brand, a business model and offering with a moat (high barrier to entry), and sound management. On the third point, Apple is returning capital to shareholders because they don’t see a return on capital that would justify the investment. This is exactly what Buffet looks for in a management team’s actions. Is the company caught up in the madness that all this Central Bank liquidity has created? Absolutely. Is it overvalued? Probably. Does it matter in the long term? Not one little bit.
    Apple has a business model founded on planned obsolescence and billions of people world wide who swear by the brand.
    Apple will still be here when the dust settles on whatever the future holds for financial markets.

  • RH

    Rob H.

    2 6 2018 19:05

    1       0

    I have to say it was a weak interview but he made a few points that I agree with, apple ai does sucks and they can't find anything to do with their cash other than buying shares. He just forgot to mention Tim Cook is no Steve Jobs! I think at best you could sell some long vertical put spreads and collect premium since you know Apple is buying shares back on every dip. Then if you think it's going to be nailed by Amazon and Microsoft you buy some long dated out of the money puts financed from the put verticles you sold. IMHO.

  • PC

    Peter C.

    2 6 2018 04:28

    2       0

    Great Topic

  • MT

    Matthew T.

    2 6 2018 03:06

    3       0

    Disappointed to say I found this to be one of the lamer interviews I've seen on RV. He spoke purely in platitudes, offered no insight and my favorite part, hates the stock but won't short it?

  • HJ

    Harry J.

    2 6 2018 02:16

    4       1

    I hope he shorts the stock.
    What a dupe, I wonder if he still lives white his parents?
    Is he from NY?
    This was the worst interview ever on RVTV.

  • GG

    Gary G.

    1 6 2018 23:47

    3       0

    This is how you trade huh? Seriously sherlock !!!!!

  • cr

    cc r.

    1 6 2018 22:32

    2       0

    Love it when a non-tech guy tells us Apple's software sucks and how it should be better. If Apple is out there buying companies left and right then I would say Tim Cook is out of his mind for paying companies in high multiples--most software acquisition fails. If Apple is spending money like Netflix or copying Google to build out "services" then I say lets short the heck out of it. So far I think Apple's management have been prudent to the brand and its technologies. Just because they are not out there showing what they do doesn't mean they're idling in innovation.

    This guy talks like he can innovate better. He should stick to the facts and the technicals if he has a good case build against investing in Apple. Too much fluff.

  • IF

    Ian F.

    1 6 2018 19:08

    12       4

    Justine is hot

  • GM

    Greg M.

    1 6 2018 18:59

    9       0

    The biggest problem I see for Apple is that smartphones are “good enough.” Just as desktops and laptops went from being a product that was always underpowered to one that is good enough, smartphones are now becoming good enough. Of course, they’ll still continue to improve incrementally, but for most people’s purposes they are good enough already. Whenever a product reaches that level of technological maturity, it becomes a replacement market and commodification (margin pressure) becomes increasingly important. This is especially so in a product selling in the hundreds of millions of units annually, with 50% gross margins. Margins and/or units solid are going to come down significantly. Already units sold are off from a couple years ago. The only reason EPS have held up is that Apple is buying back shares like crazy.

  • MS

    Michele S.

    1 6 2018 18:50

    0       0

    Not the craziest analysis I ever heard. In fact, intriguing in that he makes some good points about a lack of software development. From a technical standpoint, I'd expect a stab at new all-time highs (190.37 high thus far) and then will look for some sort of topping pattern-brave Mr. Gillis!

  • JC

    Justin C.

    1 6 2018 16:10

    4       1

    So, Apple's stock is going to go down because he doesn't like Siri, Apple didn't try to buy Qualcomm, and Apple isn't trying to be Google or Amazon?

    Yes, Tim Cook isn't a founder, but it was Steve Jobs who said he doesn't want Apple to get the big company disease and start making too many products; he said Apple will make a few products and make them great, which is what they're doing.

    What Apple has been doing is building a dominant infrastructure of products and services that work together. The combination of the product lines iPhone, Apple Watch, iPad, Mac, HomePod, Apple TV and services, iTunes, Apple Music, iCloud, Siri, iBooks, HomeKit, Continuity, iMessage, FaceTime, Apple Pay, Apple Pay Cash, and HealthKit, (probably forgot some) allow you to do an awful lot. And HomeKit works quite well so I'm not sure what his beef with home automation is. Maybe he just dines't know the products?

    If he'd prefer the malware infested, customer data mining, private conversation sharing infrastructures provided by Google and Amazon, he can use their products.

  • NJ

    Namit J.

    1 6 2018 15:56

    1       4

    This was really bad content!

  • rR

    robert R.

    1 6 2018 15:13

    2       0

    Never heard anyone state that Apple doesn't have the resources to improve on anything let alone software. I'm confused. Obviously they have the financial resources and that means they can acquire, build, or buy talent.

    Good points on Siri and AI. I would argue that with recent privacy developments with FB and GOOG and Alexa sending unwanted recordings of voice conversations randomly, we may see a negative shift of consumer usage to these types of products. Siri isn't going to make or break Apple.

    The current state of AI leads me to believe that it's still anybody's race. The big developments will come in time and Apple will be a player. They might be behind now but that doesn't mean they are out of it. Think early stages of MP3 players and digital music. Apple is a kingpin.

    Doesn't own content - Very good point. Would love to see them get more into this arena. Seems like the edgier original content is whats hot and I don't see Apple doing that fortunately. Nor do I see them buying Disney although that would be amazing as it would ultimately give them Hulu and all the Marvel/Star Wars/Pixar content.

    Also good point on the founder issue - But I don't think this means they are incapable of achieving success through innovation. The Apple watch seems like a cheesy product but how cheesy will it be if it becomes accepted protocol for health services. Holy shit that would be incredible! I think ApplePay is an incredible service for Apple. It's found money for them and once they get enough users, all they have to do is make a terminal for the stores and undercut NCRs pricing (or give it away for free like Amazon). I don't know about you but consistency with those damn terminals would be nice. I never know if its slide or chip and do I hit the X or the Green circle for credit. Apple is very good at making those things easy.

    Nothing wrong with giving back to shareholders. The buybacks will keep valuations more reasonable then FANGs.

    My prediction...Apple will hit A trillion market cap. After that the bell will be ringing. Go long now and sell at or near a trillion. Don't short.

  • BF

    Brad F.

    1 6 2018 11:40

    19       0

    This didn’t feel so much like a trade idea as some general apple bashing. He doesn’t like the stock but doesn’t think it is a short. So more of an exit idea for those already long.