Apple's (AAPL) Board Now Needs to Listen to Warren Buffett About the Cash Hoard
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The focus on Apple's (Nasdaq: AAPL) nearly $100 billion cash hoard is front and center. The company's Board is currently carefully reviewing the massive stockpile, which CEO Tim Cook admits is much more than the company needs to run effectively. Most traders are convinced the iPhone maker will pay a hefty dividend some time later in the year. However, if the Board looks to the past advice of the world's greatest investor to the late Steve Jobs, something else might be in store for Apple investors...
The Oracle of Omaha, Warren Buffett, reveled to CNBC viewers Monday morning about a conversation he had with Steve Jobs when the stock was still in the $200-range (likely 2010). At that time, Mr. Jobs reached out to Buffett and asked him what he thought the company should do with the cash.
"It was an interesting conversation because I hadn't talked to him in a long time," Buffett said Monday in the CNBC interview. "He said, 'We've got all this cash. What should we do with it?' So we went over the alternatives. It was kind of interesting."
Since there are just four things management can do with the cash -- stock buybacks, dividends, acquisitions, or sit on it -- "I went through the logic of each thing," Buffett said.
Jobs told Buffett at that time Apple would not have the chance to make big acquisitions which would require lots of money. Buffett then asked him the question. "I would use it for buybacks if I thought my stock was undervalued... How do you feel about that?" At that, Jobs admitted he felt the stock was "very undervalued."
Mr. Jobs of course did nothing with the advice, which Mr. Buffett says is because "he didn't want to do anything... he just liked having the cash."
Despite its huge run-up, investors still can argue Apple shares are cheap. Will the board take Mr. Buffett's advice now, skip the dividend and initiate a buyback? They should.
The Oracle of Omaha, Warren Buffett, reveled to CNBC viewers Monday morning about a conversation he had with Steve Jobs when the stock was still in the $200-range (likely 2010). At that time, Mr. Jobs reached out to Buffett and asked him what he thought the company should do with the cash.
"It was an interesting conversation because I hadn't talked to him in a long time," Buffett said Monday in the CNBC interview. "He said, 'We've got all this cash. What should we do with it?' So we went over the alternatives. It was kind of interesting."
Since there are just four things management can do with the cash -- stock buybacks, dividends, acquisitions, or sit on it -- "I went through the logic of each thing," Buffett said.
Jobs told Buffett at that time Apple would not have the chance to make big acquisitions which would require lots of money. Buffett then asked him the question. "I would use it for buybacks if I thought my stock was undervalued... How do you feel about that?" At that, Jobs admitted he felt the stock was "very undervalued."
Mr. Jobs of course did nothing with the advice, which Mr. Buffett says is because "he didn't want to do anything... he just liked having the cash."
Despite its huge run-up, investors still can argue Apple shares are cheap. Will the board take Mr. Buffett's advice now, skip the dividend and initiate a buyback? They should.
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