Tag Archives: Apple

Apple – The Staple of Luxury

Hello! Here’s a piece by our new analyst Pēteris Celms. Many more to come!

Apple’s Business Model

Apple has every right to the outsized profits it makes on the iPhone. Consumers could buy cheaper Android devices, but they don’t. Why? Because they value Apple’s hardware, or iOS software, or most likely, the ubiquity of the brand and the status that it has come to represent.

If you want the Apple experience, you buy Apple hardware, and in turn, use Apple software. And in order to access the digital content market install any other applications, you also have to go through Apple’s App Store. Apple does nothing to increase the value of Netflix or Spotify subscriptions, among many other digital services from app providers purchased through the App Store, but they charge a percentage for every one of these transactions (e.g. 30% in the first year, 15% every year after that for recurring subscription payments) just because they can, and will continue to be able to do so while ~45% of U.S. consumers, the world’s largest market, carry Apple devices.

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OUR NOVEMBER RESULTS

Our weighted average return in November was -0.96%. Since 2015, we have generated a net return of +38.73%.

In terms of investment strategy performance, our weighted average net returns for November were (a) +0.15% for conservative strategies, (b) -0.09% for balanced strategies, and (c) -2.11% for aggressive strategies.

Markets continued to be extremely volatile in November. The S&P 500 index traded all over the place, giving up -3.83% in the third week of the month, before jumping +4.71% the very next week. By month end, the S&P 500 had gained +2%. Emerging market stocks (+5.07%) finally managed to rally on the back of lower US bond yields, and US investment grade bonds ended the month +0.64%.

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Tesla Sells Junk (bonds), Malls Love Apple, Watching TV Has Become Stressful, and Facebook Will Now Take Your Order…

We have an amazing team here at BlueOrange. Kaspars is on a well deserved vacation, and Krista and our summer intern Renārs do a great job keeping everything in order, while also providing thoughtful and fresh insights into making us a little bit better every day.

Here are some links that they found interesting this week:

Tesla manages to raise $1.8b through junk bonds yielding 5.3%
Earlier this month, Tesla came out with a statement saying that the money required to fund the projected production ramp of its recently released Model 3 is going to be raised through a bond offering. At first, the electric carmaker wanted to raise $1.5 billion, a number that, due to high demand, was later increased to $1.8 billion.

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Tim Cook Still Thinks About ‘The Jetsons’

Here’s a link to an article from FastCompany about Apple:

LINK: APPLE PLAYING THE LONG GAME

I have defended Apple in the past. I held on to their stock for too long. This interview cut right to the heart of the matter:

“People like things they can do now, not just think about,” Cook says. “I’ve been thinking about The Jetsons since I was a kid. But occasionally you want The Jetsons to come to reality. That’s what Apple is so great at: Productizing [sic] things and bringing them to you, so you can be a part of it.”

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On the Importance of Narrative…

Last week I was invited to talk to an undergraduate business class at Riga Business School (thank you Lester Golden!). One of the themes I focused on was the importance of narrative when looking at individual stocks. From my experience, you can perform as many valuations as you like, but no matter how cheap a stock appears to be, it tends to be subservient to its overall narrative. As investors, we are taught to seek out and purchase future profits at a discounted rate, but as humans, we’re suckers for a good story.

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