![]() As seen, Buffett made his purchases during 2016-2017 when the price is below or near 10x EBT. Pretax earnings are also referred to as "EBT", Earnings Before Taxes, in this article. The following chart shows the price history of AAPL and its 10x pretax earnings since 2010. The list is a really long one, ranging from Coca-Cola, American Express, Wells Fargo, Walmart, Burlington Northern, and of course the more recent AAPL purchase and his recent $25B repurchases of BRK shares as analyzed in my earlier article. ![]() ![]() If you're a devout Buffett cultist like this author, you must have noticed or heard that the grandmaster paid ~10x pretax earnings for many of his largest and best deals. Here, I will first provide a brief recap of my last article to facilitate the new discussion today. I hope these results provide useful insights not only for AAPL investors but also for investors interested in other stocks. As to be seen by the results, profitability seemed to be lower on the surface, but upon a closer look, the quality of the earnings is actually improved and became more sustainable. But as an investor, especially a long-term and value-driven investor, I feel more comfortable with Tim Cook with his focus on operation and existing products. His vision and innovation - when worked - created an astronomical level of profitability, but is difficult to sustain. As to be seen by the results later, as a person, I love and even idolize Steve Jobs for his vision and relentless innovation-first style. The results show the different profitability drivers of AAPL during Steve Jobs' era and Tim Cook's era. The analysis shares my attempts to answer my own question using a so-called DuPont analysis. So I was intrigued by the timing of Buffett's purchase. However, as to be seen in the remainder of this article, the profitability of the business was in rapid decline during 20 as measured by the return on capital employed ("ROCE"). Buffett bought the majority of his APPL shares during 20: a total of 661M shares, about 4% of the total shares currently outstanding. My last article on AAPL was performed under a framework that I call Buffett's 10x Pretax Rule, with a particular focus on its valuation and compounding power.Īnd this article analyzes a different aspect: the timing. ( NASDAQ: AAPL) is the largest position in Warren Buffett's Berkshire Hathaway portfolio. If you are reading this, chances are that you already know that Apple Inc. Leander Kahney is the editor of Cult of Mac and best-selling author of "Jony Ive: The Genius Behind Apple's Greatest Products" and "Inside Steve's Brain." His latest book, "Tim Cook: The Genius who took Apple to the Next Level," takes a look at how Apple CEO Tim Cook has led Apple to astronomical success after the death of Steve Jobs in 2011.Nikada/iStock Unreleased via Getty Images The investment thesis " had the same vision I did," Jobs told Walter Issacson, author of the biography "Steve Jobs." "We could interact at a high strategic level, and I could just forget about a lot of things unless he came and pinged me." Coming from a procurement background, he couldn't have been a better fit for Apple - and for Jobs personally. Given the sizable job of overhauling Apple's manufacturing and distribution, Cook ended up being one of the best hires Jobs ever made. Cook was well aware that he was inheriting a mess. The company was near-bankrupt and employee morale was low. In March 1998, Jobs hired Cook, aged 37, as senior vice president of worldwide operations, with a base salary of $400,000 and a $500,000 signing bonus.Īt the time, Apple was not a place where very many people wanted to work. So all of a sudden, I thought, I'm doing it. "But I looked at the problems Apple had, and I thought, you know, I can make a contribution here. "I had always thought that following the herd was not a good thing, that it was a terrible thing to do," Cook said. ![]() "One CEO I consulted felt so strongly about it, he told me I would be a fool to leave Compaq for Apple."īut Cook knew that turning down a job at Apple would have meant turning down the opportunity to be part of something special. "Any purely rational consideration of cost and benefits lined up in Compaq's favor, and the people who knew me best advised me to stay at Compaq," Cook said in his 2010 commencement speech at Auburn University. Cook had some doubts at the back of his mind, but they weren't big enough to dissuade him from taking the job. ![]()
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