1/7 $AAPL generated ~$102 Bn FCF in last 12 months. Even though it handily outperformed the index in almost all timeframes, it still trades at ~3.8% NTM FCF yield, arguably not an egregious valuation level.
In 2012-16, it was regularly trading at ~10% NTM FCF yield. Why?
In 2012-16, it was regularly trading at ~10% NTM FCF yield. Why?
2/7 One rationale was AAPL was expected to be disrupted. Its hardware margin was always assumed to be unsustainable.
Even Clayton Christensen feared all doom and gloom for AAPL. The consensus seemed to be "good enough" Androids will prove to be existential threat for iPhone.
Even Clayton Christensen feared all doom and gloom for AAPL. The consensus seemed to be "good enough" Androids will prove to be existential threat for iPhone.
3/7 It's fun to go back and see what people were worried about a decade ago. Some wondered whether Android is already "good enough" in 2012 which would erode iPhone's dominance.
Today, teens dread the "green text" in Android.
Today, teens dread the "green text" in Android.
4/7 It's humbling to see how even the titans of the industry got it wrong. It's a reminder just how excruciatingly difficult predicting tech trend is.
Interestingly, @benthompson understood the power of Apple perhaps better than Christensen did.
Interestingly, @benthompson understood the power of Apple perhaps better than Christensen did.
5/7 He identified three blind spots in Christensen's argument back in 2013:
"Buyers are rational
Every attribute that matters can be documented and measured
Modular providers can become “good enough” on all the attributes that matter to the buyers"
"Buyers are rational
Every attribute that matters can be documented and measured
Modular providers can become “good enough” on all the attributes that matter to the buyers"
6/7 Thompson explained why none of those assumptions hold water after close examination.
It's a fascinating piece (some highlights here): stratechery.com/2013/clayton-c…
It's a fascinating piece (some highlights here): stratechery.com/2013/clayton-c…
7/7 It's this perennial fear of disruption that bamboozled most investors. The ones who weren't confused about Apple's moat made a killing.
What's interesting is it took YEARS for market to alter the perception and frankly without Buffett swinging big, it might take even longer.
What's interesting is it took YEARS for market to alter the perception and frankly without Buffett swinging big, it might take even longer.
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