Apple’s (Nasdaq: AAPL) ipod, iphone, ipad and itunes are all great products but as Foolish investors know, just because a company has great products it doesn’t automatically mean it’s a great investment.
What makes a great investment is a combination of great product, great management and a great purchase price. Apple certainly has the first part of the equation – great product. The second part is great management, and sadly the jury is still out on since the passing of founder Steve Jobs. The third part is great price, and some very wealthy and canny investors are telling us the stock definitely fits that criterion.
Apple’s share price has fallen from a high of US$700 in September 2012 to US$500 this week, having plummeted all the way to US$390 in April 2013. Starting the billionaire ball rolling in 2012 was hedge fund guru David Einhorn who purchased a significant stake in the company. Einhorn has since gone on to threaten Apple with lawsuits and forced the board’s hand into returning more funds to shareholders.
Unsurprisingly other investors have been watching the Apple versus Einhorn battle unfold and it now appears activist investor Carl Icahn has been tempted. Two days ago, Icahn tweeted: “We have a large position in APPLE. We believe the company to be extremely undervalued.”
Icahn’s tweet was followed by a quarterly regulatory filing from George Soros — the billionaire speculator best known for his huge currency bet which ‘broke the Bank of England’. He has upped his stake in Apple to 66,800 shares, more than double his holding in the previous quarter.
With Apple announcing it will buy back US$60 billion worth of stock, there is a significant catalyst to drive the shares higher. Identifying a catalyst is for many investors an essential part of their investment process.
The best time to do buybacks is of course when shares are cheap. With many stocks hitting 52-week highs it is understandable that more Australian companies are not undertaking them. One exception is blood plasma group CSL (ASX: CSL) which just this week announced a continuation of its $900 million buyback program.
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Motley Fool contributor Tim McArthur does not own shares in any of the companies mentioned in this article.