A VC - Latest Comments in Thoughts on Google and Apple's Earnings

Re: Thoughts on Google and Apple's Earnings

fredwilson — Fri, 16 Oct 2009 08:17:26 -0000

Yup

Re: Thoughts on Google and Apple's Earnings

Steve — Fri, 16 Oct 2009 04:29:04 -0000

Big mistake on Apple, eh? It is $100.00 higher per share than when you sold it. Ouch.

Re: Thoughts on Google and Apple's Earnings

AC — Mon, 26 Jan 2009 17:47:57 -0000

Fred, You could also buy Jan2010 Leaps on GOOG (say at strike price of 300) and sell the front month calls (say at 340) to reduce your net money exposure. For even longer term, you could even buy Jan 2011 calls. At today's prices, Jan2010 300 / Feb 350 would be a net investment of 7000 per contract; Jan 2011 300 / Feb 350 would be about 9200 per contract.

Re: Thoughts on Google and Apple's Earnings

fredwilson — Mon, 26 Jan 2009 08:16:08 -0000

I didn't know until the news came out and it was clear they'd been hiding and saying misleading things about the facts about his health

Re: Thoughts on Google and Apple's Earnings

Donald Johnson — Mon, 26 Jan 2009 01:23:27 -0000

I sold AAPL after it announced Jobs wouldn't make MacWorld. I was worried about his health and unhappy with the secrecy. And I had a profit on my hedged covered call trade.

10.17.08. Bot AAPL @ $97.73. Sold Jan 09 90 strike calls at $19.90 for a 20% hedge, or cushion.
12.17.08. Bot APPL Jan 09 90 calls for $7.50. Sold stock for $90.17.
Profit = $5.09 after commissions. Annualized return in 62 days = 30.63%.

This worked on 4 of 5 trades. On one, a 15% cushion didn't protect me enough and a sharp drop in the stock the first day after expiration killed me. Now working out of it by selling covered calls. You have to be a trader to succeed with options.

As for the outlook for AAPL and GOOG, I'm very bearish because I'm bearish on the economy and the markets.

See Abelson in this week's Barron's, for starters. Premium priced gadgets won't sell with 8% to 9% unemployment. And businesses cut advertising when nothing sells.

Re: Thoughts on Google and Apple's Earnings

Ed — Mon, 26 Jan 2009 00:46:22 -0000

How do you know Jobs & board were lying?

Re: Thoughts on Google and Apple's Earnings

fredwilson — Sun, 25 Jan 2009 21:04:21 -0000

I agree that amazon is expensive

My most recent purchases were at $35 and $40, where the PE was a lot lower

But you also get the entire web services franchise which is in its early
days of scaling into a huge business when you buy amazon

I also think more retail will move online in the downturn as high cost
retail goes bust

So that¹s why I am still holding the stock

I agree that apple is a great stock at a great price right now

I just don¹t like the way they treat shareholders and at times customers

So I am staying away

fred

Re: Thoughts on Google and Apple's Earnings

Incrediblesoftwaresolutions — Sun, 25 Jan 2009 17:34:19 -0000

@andrew parker

AFAIK Google knows about this and has been buying up small tech firms, some relative unkowns however my research tells me that the next possible purchase could well be twitter. I also heard through the grapevine that they are thinking about doing a major shift in their business model in line with what they have experimented before, charging for the free services. We have seen that before in the search or custom search for$100 per year. With twitter they could monetorise this perfectly in much the same way they did with youtube., twitter japan makes money in this way already. I heard through a software engineer that they might be working on a facebook equivalent but I could not get confirmation of this.

One of the reasons their ppc/cpc model is suffering is partly because of Facebooks successes.

I also understand they are going to be laying off some 3500 people through various means such as attrition and relocating some of their smaller units to Africa where labour is cheaper. Of course you know that Microsoft is to lay off nearly 7000 people over the next two years?

If you want to look at a good company that is very good at doing this recession thing have a look at DiData

Re: Thoughts on Google and Apple's Earnings

PlanMaestro — Sun, 25 Jan 2009 14:42:17 -0000

And regarding AAPLs accounting remember they are accruing the iPhone revenues in a VERY conservative 2 year period.

Re: Thoughts on Google and Apple's Earnings

PlanMaestro — Sun, 25 Jan 2009 14:36:14 -0000

Fred, can you in a later post defend your optimism regarding Amazon? I find it VERY overpriced at 34 P/E and it is mainly a retailer.

Regarding Apple, remember than overreaction to bad news is the best time to buy. Job's health importance is overblown given the current product line-up. If it does not disminish my trust in their accounting and law abbiding I don't care. Some examples:

- Coke during the New Coke mess: Buffett's greatest investment, P/E of 10 how do you like them AAPLs?
- HealthCare during Clinton: One of Buffett's greatest errors of omission and it's deja vu again (UNH, WLP, WCG)

Re: Thoughts on Google and Apple's Earnings

fredwilson — Sun, 25 Jan 2009 12:58:25 -0000

It¹s not a protest. It¹s my money. If I am uncomfortable with the
management, I don¹t feel having my money invested with them.

Re: Thoughts on Google and Apple's Earnings

Dave B. — Sun, 25 Jan 2009 01:51:04 -0000

I think you are letting your emotions effect your decision on Apple. You lay out the stellar fundamentals but sideline yourself out of some kind of protest.

Re: Thoughts on Google and Apple's Earnings

Guest — Sat, 24 Jan 2009 17:11:54 -0000

For a longer term investor that is willing to average down into a market that could easily fall another 50% but likely to knock around in a trading range for a while, selling naked puts makes some sense.

You can collect premium for as long as the market knocks around in this trading range, roll if the position from month to month, and start selling covered calls if you get put.

You're not going to get much upside if there is a phenomenal recovery, but you'll do fine in a flat market, and better than simply averaging down.

And keep in mind that any rally at the moment is almost certainly going to fail over the next 6-9 months, so worrying about lost upside is a bit misguided unless you have a clear plan to lock in short term gains.

Re: Thoughts on Google and Apple's Earnings

lrd — Sat, 24 Jan 2009 15:31:08 -0000

Ok Fred, how about this radical idea:

Now that Circuit City is history and with Best Buy following in their footsteps. What if Apple, with its $28B cash horde, can out last Best Buy and become the only nation wide brick & mortar computer distributor? I know Walmart sells computers; but who the hell would by a computer from people who could barley use one?????

Think about that!

Re: Thoughts on Google and Apple's Earnings

lrd — Sat, 24 Jan 2009 15:23:21 -0000

Hey Fred, buy some Microsoft stock. Heard they're doing just fine. Zune sells are -50 up; Windows Vista is all the rage; the XBOXs will soon sell for $99 and the new Word & Excel will have 50 more features that nobody will ever use. Sounds like compelling fundamentals to me. Don't miss the boat.

PS: Do be on the outlook for icebergs!

Re: Thoughts on Google and Apple's Earnings

Ferruccio — Sat, 24 Jan 2009 13:25:36 -0000

One accounting wheeze that's often overlooked when discussing AAPL is how they chose to recognize the majority of their iPhone revenues -- those that come from payments to them from AT&T (and their other telecom partners in other countries). Apple recognizes those revenues (hundreds of $ per iPhone -- and over 10 millions iPhones were sold in the last 6 months) on a cash flow accrual basis -- i.e., spread over 24 months from the time of sale, even though they're contractually assured (unless AT&T goes bankrupt;-). So the yearly net income of 4.8 B$ is in fact substantially understated (not for an accountant, but for an investor) -- there's an extra billion or so of certain but as-yet unbooked cash coming in 2009. This tilts the ratios further in favor of investing in Apple, if you're in it for the mid-long term, past gyrations due to mass hysteria about Jobs' health. (Disclaimer: I'm long AAPL and plan to stay so going forward).

Re: Thoughts on Google and Apple's Earnings

fredwilson — Sat, 24 Jan 2009 13:07:15 -0000

I agree that aapl is an amazing buy on fundamentals. If you are comfortable investing in a mgmt team that doesn't mind lying to shareholders, this is a great stock

Re: Thoughts on Google and Apple's Earnings

andrewparker — Sat, 24 Jan 2009 02:30:56 -0000

My take on the GOOG Q4 report.

Long form: http://thegongshow.tumblr.c...

Short form: I'm concerned about paid clicks growth 10% q/q doesn't add up when you run the numbers. I think their click through rate on ads is dropping, and that doesn't sound good to me.

Re: Thoughts on Google and Apple's Earnings

OPC — Sat, 24 Jan 2009 00:11:41 -0000

I guess the main thing I would add is that on average, options are a very efficiently priced instrument. That is, you will most likely over time break even at best when implementing any combination of strategies (there is no obvious way to make good, risk adjusted profits).

For example, as mentioned in previous posts, a lot of wealth managers advise their clients who own a stock, say google, to sell out of the money calls as a way to earn extra income. But most investors never really understand that this is essentially equivalent to selling a put. If you asked that same person if they wanted the payoff of selling a put, a lot of them would say no even after saying yes to the first suggestion.

Professional options traders do not trade GOOG options for the "delta" aspect of it (how the options move when the stock itself moves). They trade it because it has convexity, and therefore exposure to how volatile GOOG is in the future. They care not which direction it moves, but the magnitude of the move. This is hugely important in its pricing, and therefore anytime you decide to either sell a call or buy a put, you are essentially hoping that the implicit volatility is priced fairly or favorably.

There are good reasons to trade in options. If you have a very strong view of either the volatility of Google or some view on the potential path of the stock (options are hugely path dependent), then this is something you cannot express by buying or selling the stock. In addition, if for some reason you estimate that your opportunity cost of capital is high, then you can acquire something called a synthetic option position where you pay the market maker's price of funding the position, which you might estimate to be lower than yours.

Absent these conditions, most likely a general bullish view of Google is most cheaply expressed by simply buying the stock. The transaction costs of buying Google stock are lower than in options (option liquidity providers make quite a bit buying or selling options with retail investors).

Re: Thoughts on Google and Apple's Earnings

elementaryfinance — Fri, 23 Jan 2009 22:52:36 -0000

Good work! I also wrote an article about Google and Microsoft's earnings. Check it out

Re: Thoughts on Google and Apple's Earnings

fredwilson — Fri, 23 Jan 2009 21:00:16 -0000

Hmm

I am slowly realizing that options is a whole new world out there

Re: Thoughts on Google and Apple's Earnings

fredwilson — Fri, 23 Jan 2009 20:54:26 -0000

Every time I say something negative about Jobs or Apple, I get flamed

I think I need to do it at least daily

Re: Thoughts on Google and Apple's Earnings

fredwilson — Fri, 23 Jan 2009 20:52:26 -0000

With some and gain with others

I just say what I think and people will act accordingly

Re: Thoughts on Google and Apple's Earnings

fredwilson — Fri, 23 Jan 2009 20:39:26 -0000

Thanks David

I really want to try this but you have to be investing real money to do this

Re: Thoughts on Google and Apple's Earnings

fredwilson — Fri, 23 Jan 2009 20:33:23 -0000

I think apps (mail, calendar, docs) and local (maps, local search) are big
time oppty¹s for them that are also near term oppty¹s if they get focused on
them