Barry Ritholtz: WTF is Wrong With Apple Investors?
Market strategist Barry Ritholtz came down hard on Greenlight Capital’s David Einhorn and other investors clamoring for more returns from their Apple (NASDAQ:AAPL) investments and sparking the company into admitting it was contemplating increasing dividend. According to Ritholtz, having large cash holdings and pumping profits into research and development was Apple’s way of guarding against becoming technologically irrelevant.
“As a longstanding Apple guy and someone who was pushing the stock post iPod at $15 (pre-split), I cannot help but be astounded at the current crop of Apple shareholders,” Ritholtz wrote in a post titled The Collossal Gall of Bad Apple Investors. “Wall Street has always misunderstood Apple but its now getting ridiculous.”
While Apple should listen to “these activist shareholders” for legal reasons, the company could cite several reasons for holding on to its $137 billion cash reserves, he wrote. Among the possible reasons Apple could give, according to Ritholtz, were funding a separate R&D division to keep fostering “outside the box” innovations, creating a subscription-based unlimited streaming music business, making a series of strategic acquisitions, and funding a venture capital division to foster more innovations for the Apple ecosystem.
In fact, Apple didn’t even need to explain what it needed the money for, and instead just say it was working on a secret plan that could not be revealed to rivals because it would risk billions of dollars.
Ritholtz cited Dell’s (NASDAQ:DELL) example as a cautionary tale. “If you want to know why Apple is holding onto all that money (aside from obvious tax considerations), just look at Dell,” he wrote. “It is a cautionary tale than any technology company can miss the next shifting tech trend and quickly become irrelevant. Bang, you are the next Maytag.”
He added that he had no patience for investors who were complaining after a 30 percent drop in the share price when the company had risen substantially higher than that for years. “Boo hoo for the investors who feasted on the way up, but — WTF?!? – saw a performance setback because after a 10,000 percent move, Apple now gave back 30 percent?” he asked.
The reason for complaint, or the “cognitive dissonance,” was that these investors were refusing to accept their own mistake of not getting rid of the stock when they could at a much higher profit and “hanging around too long,” he added.
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