LONDON -- When I bought my shares in Apple , I didn't inscribe its quarterly reporting dates in my diary. I generally buy shares to hold for a decent length of time, if not "forever" as Warren Buffett would have it.
I think the market's obsession with quarterly figures is one of the reasons the shares are trading at a poor valuation. Investors are looking for and finding disappointment in quarterly earnings, or in guidance for the next period, or in plans for new products.
Market sentiment is more negative than is justified by fundamentals, driven by the tailing off of Apples' previous astronomic and relentless growth rates. There has been an emotional reaction to the first quarterly year-on-year profit decline for 10 years.
Even the Financial Times Tech blog described this as "Apple's crucial quarter." But I'm with Buffett on this one: I didn't invest in a company for just one quarter's results. Actually, Apple surprised on the upside on its quarterly outturn, but disappointed with its guidance for the next quarter. iPhone sales are slowing, and the competition is tougher. That's not news.
Worse before it gets better
It will get worse before it gets better. CEO Tim Cook offered new product announcements "this [autumn] and throughout 2014." That will make for a long gap in the Apple product-watchers calendar, and generate more doom-and-gloom prognoses.
The bright spot was the announcement of plans to increase the return of cash to shareholders. Previously, Apple planned to return $45 billion by the end of 2015 through dividends and share purchases. It's more than doubled that to $100 billion.
The quarterly dividend was increased by 15%. Though many might prefer more dividends and less buybacks, the latter are a capital-efficient way of returning value while the stock price is languishing.
Bigger payouts may help focus attention on Apple's valuation. The shares are trading at under 10 times earnings and on a prospective yield of nearly 3%, if the new quarterly dividend is maintained. That's pretty cheap for a steady-state business, but Apple is still an ideas factory and a pause in new product announcements doesn't mean product innovation has come to a standstill.
So patience should see a decent upside. The market's obsession with quarterly results is an imperfection. That's a value-investing approach.
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