Replies to post #20651 on Apple Inc (AAPL)

[fmikehugo]

Lango - "Flawed" is not really the right word.

Their method is transparent, and as a method of valuation I can't argue with it. The difference is the market psychology that attaches to each individual stock. You are right that the odds of seeing a 40% discount are miniscule, because AAPL has a market psychology that defies conventional valuation.

I'm not trading AAPL now but am trying to buy QCOM at or below 36. Very frustrating. Similar psychology. Reminds me of the old "War of the Worlds" where they are looking at the aliens' ship and one says to the other "What's holding it up?!"

In the case of AAPL and QCOM the answer is that people believe. Morningstar can't and doesn't try to value that.

[roni]

Good post Lango,

I am in essential agreement with it. I bought a small position a couple of days ago in part because I think the momentum has a way to go. I think there is a chance (I'd say somewhere around a 25% chance at this point, strictly my guess), that enough of the iPod crowd will buy the G5 iMac that it will pop CPU sales over the next 2 years--very little of that will cannabilize existing sales. When I say enough of, it does not need to be a high percentage of the iPod crowd. I bought thinking it might be a good ride through January of 2006, but we all know the risks of holding Apple too long and of trying to predict what will happen in the tech market short-term.

I don't think MSFT's entry into the music market will hurt Apple tremendously. It is and will continue to be a rapidly expanding market. I think the introduction of the G5 iMac may be the first time we see Apple's non-CPU business bring growth to part of the CPU side. It is a big maybe which is part of why my position is a small one :).

Ron