Investing Thread

[Skatastrophy]

SoCal and Wags: My feeling is that dividends are the better way to reward shareholders, but I appreciate the conversation.

The best way to reward shareholders is to invest in growth and innovation.

But companies that are out of ideas waste their money on repurchases and dividends instead. Better than having the cash sitting around depreciating.

[Plaque Lives Matter!]

The best way to reward shareholders is to invest in growth and innovation.

But companies that are out of ideas waste their money on repurchases and dividends instead. Better than having the cash sitting around depreciating.

Or in pharma to which I am intimately familiar, your R&D is M&A. (An exaggeration but very common)

[Plaque Lives Matter!]

I'm not sure about this statement, although in some ways I have the same question about buybacks as you do.  On the other hand, are not shareholders supposed to be rewarded for taking a risk on the performance of the company?  What better way to be rewarded than to share in the profits / earnings of the company through share buybacks and distribution of dividends? And what if AAPL believes it is investing the proper amount of capital into R&D for this moment in time?  They know much more than I do about how best to put the profits of the company to work.  Therefore, just like you, I have questions about the size of the AAPL buybacks, but I can't really fault them for their approach to date.  It has worked out really well for me and other shareholders, right?

Maybe Apple isn’t the greatest example for the phenomenon but long term growth and innovation is absolutely being  affected by stock market return pressure in the modern economy.

you can take the “it’s my money and I know how to spend it best” approach but in an increasingly volatile stock price environment the pressure on shorter term, higher and higher returns for shareholders is absolutely stifling innovation.

It’s absolutely negatively impacting tech such as meta, google, etc who are caught in the growth at all costs cycle at the expense of their product itself. Google took what they created that is basically a public utility at this point and have torpedoed it into the sh***er because of this perpetual growth model.

You simply cannot rely on small business innovation anymore with the economies of scale at play, but the pressure of returns at all costs is so high it’s sabotaging the products themselves

[Skatastrophy]

Or in pharma to which I am intimately familiar, your R&D is M&A. (An exaggeration but very common)

True for large old tech companies too, they're just too big and manager heavy to innovate properly anymore.

[JWags85]

Maybe Apple isn’t the greatest example for the phenomenon but long term growth and innovation is absolutely being  affected by stock market return pressure in the modern economy.

you can take the “it’s my money and I know how to spend it best” approach but in an increasingly volatile stock price environment the pressure on shorter term, higher and higher returns for shareholders is absolutely stifling innovation.

This leads to this...

True for large old tech companies too, they're just too big and manager heavy to innovate properly anymore.

IMO.

They don't have the time and leash to develop and run out innovation, so they need to acquire turnkey new tech/innovation so have immediate results.  If it doesn't work, they can justify it away later on, but they don't get dinged in the meantime for taking the time to develop and no immediate results.

I can remember the tide shift when an earnings beat was no longer enough if guidance and outlook wasn't strong enough.  And now its to the point that the latter well outweighs the actual earnings.

[MU82]

The best way to reward shareholders is to invest in growth and innovation.

But companies that are out of ideas waste their money on repurchases and dividends instead. Better than having the cash sitting around depreciating.

I mostly agree with this.

Doesn't change my preference for dividends over buybacks.

[MU82]

For those who had been losing sleep over whether the ultra-rich would become ultra-richer ...

https://seekingalpha.com/news/4101547-wall-street-bonuses-poised-to-recover-on-back-of-market-gains-report?

Wall Street bonuses are set to bounce back this year, compensation consulting firm Johnson Associates said in a Tuesday report, thanks to strong equity markets and a recovery in dealmaking activity.

Investment bankers specializing in debt underwriting are expected to garner the biggest increases in bonuses this year, ranging from 15%-25% Y/Y growth, driven by "substantially higher" debt issuance revenues vs. 2023.

Bonuses for equity underwriters are projected to climb 10%-20% in 2024, with the "IPO market gradually awakening," Johnson Associates said.

[TSmith34, Inc.]

DIS getting punished for a fairly solid quarter, IMO. Buy the rumor, sell the news maybe.

[MU82]

DIS getting punished for a fairly solid quarter, IMO. Buy the rumor, sell the news maybe.

It was a really good quarter, and I'm surprised by the pullback. Then again, I'm usually surprised a couple times a week during earnings season. Bad reports/guidance result in advances; good reports/guidance result in sell-offs. Wall Street can be wacky ... and this is why I'm a long-term investor and not a trader.

[jesmu84]

Isn't the recent discussion point here the inevitable outcome of shareholder capitalism?

[MU82]

Isn't the recent discussion point here the inevitable outcome of shareholder capitalism?

Maybe. But - and I know you'll disagree with this - it's the best system out there.

[Herman Cain]

Relative to the conversation about AAPL share buy backs versus dividend increase. I would much prefer the dividend increase.

My basis in AAPL is less than $1 per share and as such I have no intention of selling during my lifetime. So buy back does nothing for me. Cash Dividends can be utilized in many ways.

Sometimes corporations buy back shares to offset new share issuances to management. 

[jesmu84]

Maybe. But - and I know you'll disagree with this - it's the best system out there.

I can't definitively refute your statement.

What I can say is that likely, over the centuries, each new/stable economic structure/system thought it was the best system out there.

[JWags85]

I can't definitively refute your statement.

What I can say is that likely, over the centuries, each new/stable economic structure/system thought it was the best system out there.

But shareholder capitalism is not new.  It’s been around for hundreds of years and the most successful and stable in that time. And the current system of open and free capital markets is a far more widespread version with less barriers to entry than existed early on.

While it’s not perfect or without faults, there has yet to be a system that both incentivizes innovation and risk taking while offering opportunity and returns to a large amount of people, beyond traditional stakeholders.

[TSmith34, Inc.]

Relative to the conversation about AAPL share buy backs versus dividend increase. I would much prefer the dividend increase.

My basis in AAPL is less than $1 per share and as such I have no intention of selling during my lifetime. So buy back does nothing for me. Cash Dividends can be utilized in many ways.

Sometimes corporations buy back shares to offset new share issuances to management.

What did Tim Cook say when you proposed this to him over lunch?

[jesmu84]

But shareholder capitalism is not new.  It’s been around for hundreds of years and the most successful and stable in that time. And the current system of open and free capital markets is a far more widespread version with less barriers to entry than existed early on.

While it’s not perfect or without faults, there has yet to be a system that both incentivizes innovation and risk taking while offering opportunity and returns to a large amount of people, beyond traditional stakeholders.

Sure sure. All true.

But, as I said, I'm sure all different economic systems thought they were the best until the next better thing came along.

I have to think that eventually something better will replace shareholder capitalism.

[Skatastrophy]

Sure sure. All true.

But, as I said, I'm sure all different economic systems thought they were the best until the next better thing came along.

I have to think that eventually something better will replace shareholder capitalism.

Yes, and right now we are not yet aware of that economic system.

This is like talking about meteorology, honestly. There will be better predictive systems in the future and the current ones are flawed, but that's how life is going to go for now.

Edit: also there's the economy thread for a reason