Jim Cramer: Apple Should Acquire These Companies
David Einhorn’s suggestion of dividend increases and preferred shares will prove a positive catalyst for Apple’s (NASDAQ:AAPL) stock, but there were other appropriate alternatives for the company. That assertion was made by stock specialist Jim Cramer, who said he believed Apple instead needed to use its massive cash funds to make acquisitions in order to keep growing as a company. Apple currently has $137 billion in cash holdings.
“This is a great intellectual exercise and a novel idea, but I have a lot of novel ideas that would actually move the stock up because it would increase the growth rate,” Cramer said on CNBC about Einhorn’s statement that Apple needed to return more money to its investors. Those ideas include a major acquisition, such as Twitter or Netflix (NASDAQ:NFLX), Cramer suggested.
“I want growth, I’m sorry, I’m a traditional investor,” he said. “I have a suggestion for [Einhorn]: You can always sell the stock. If you don’t like what they’re doing, you can sell it.”
According to Cramer, Einhorn’s idea would be effective, but said that it was “convoluted” and not a long-term solution. “This is an interesting method of returning capital because it doesn’t necessarily impact the cash position,” he said. “It’s convoluted because there are simple ways to embrace Apple, including dividends.”
The stock specialist did agree with Einhorn’s suggestion that Apple was increasingly turning into an “anti-shareholder friendly” company.
“Why isn’t the dividend bigger? Why isn’t the buyback bigger?” he asked. “Most companies would not accept the treasury stance of Apple, they would say it’s just not good enough. What really worries me here is that their reaction is so bad to [Einhorn]. Intellectually, Apple’s position can’t be defended,” he said.
Einhorn’s Greenlight Capital sued Apple on Thursday, saying the company should give stockholders a bigger share of its cash funds. Einhorn said Apple had a “cash problem” it needed to fix by giving away perpetual preferred stock with a 4 percent yield.
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