Apple CEO Tim Cook's Lengthy Interview at All Things Digital Conference

CEO of Apple (AAPL) Tim Cook recently gave a lengthy talk at All Things Digital's Conference.  We wanted to highlight this because AAPL is the top stock held by hedge funds.

Not to mention, this is the lengthiest interview we've seen with him publicly.  We've embedded the video below, but for those who might not have an hour and forty minutes to sit and watch, we've highlighted the key takeaways:

On Innovation

Right from the start of the interview, Cook focused on how Apple always has been and will continue to be about innovation.  He says the products he's seen (but obviously can't talk about) that they're working on are phenomenal.

With the late Steve Jobs' passing, many investors questioned where the innovation would come from and we asked similar questions in our post on the Apple conundrum.  Cook says innovation is what the company will always be about.


On the Halo Effect

Cook himself pointed out the 'halo effect' that many analysts have recognized.  He said that when the iPod was released, it exposed Apple to customers in the developed world that didn't know about the company.  Those consumers then were exposed to Mac computers and many of them became customers there as well.

And when the iPhone came out, Cook says a similar phenomenon occurred, but this time more-so in the developing world: China, Middle East, Russia, and Latin America.

And now, he says they're in the first inning of the iPad because he thinks the tablet market can overtake the personal computer (PC).


On What Cook Learned From Jobs

Obviously, things at the company have changed since Tim Cook took over as CEO.  But of course Jobs taught Cook many things and he shared some of that wisdom at the conference. 

Of the things Jobs taught him, Cook said that focus is key, not only in running a company, but also in your personal life.  "You can only do so many things great... cast the rest aside."

Cook also revealed that when Jobs had a conversation with him about becoming CEO, he emphasized that he didn't want people to sit around and wonder "What would Steve do?" after he was gone.  Instead, he only desired that things be done right.

On some of the key differences between AAPL under Jobs versus Cook, the current CEO says, "we did the right thing by doing dividends and share buybacks."  But there will also be similarities as they'll continue to invest heavily in research and development.


Chinese Manufacturing

Cook also touched on how it makes sense for Apple to outsource certain aspects of their operation where they think others can do the same or better.  One area in particular is manufacturing as they've let others handle this while they focus their time on doing what they do best: creating and innovating.

And while the company outsources manufacturing, Apple still focuses on running the supply chain and the managing the operational aspects of the company.


On the TV Market

"This is an area of intense interest for us ... We're gonna keep pulling the string and see where it takes us."  

Cook kept talking about the current iteration of the Apple TV (set top box) and Walt Mossberg prodded for more information and wondered if they would make an actual television set instead.

Cook said that they key to any new product is figuring out what the key components are and how they could control them.  They want to make products where they can improve upon something and give people something that they would want.

Cook of course did not comment on what they specifically were doing in the television space aside from pointing to their current product and saying the area is very interesting to them.


On Potential Acquisitions

Instead of focusing on revenue streams of potential acquisitions, Cook says they like to focus on great people, great products and intellectual property instead.  He said they currently aren't looking at any big acquisitions, but he wouldn't rule them out.  They did not look at Instagram (Facebook purchased them).


Embedded below is Tim Cook's appearance at the All Things Digital Conference:




For hedge fund resources on Apple:

- Dan Loeb's investment thesis on Apple

- David Einhorn refutes bear concerns on AAPL

- Goldman Sachs VIP list of most important stocks to hedge funds

- The Apple Conundrum: when to sell?

What Steve Jobs' Medical Leave Means For Apple Investors (AAPL)

Apple (AAPL) CEO Steve Jobs emailed Apple employees to let them know he would be taking a medical leave of absence. Given that this is one of the largest companies in the world, we figured we'd examine what this means for the company and its investors. After all, according to Goldman Sachs, Apple is the stock that matters most to hedge funds.

Steve's email is posted below:

"Team,

At my request, the board of directors has granted me a medical leave of absence so I can focus on my health. I will continue as CEO and be involved in major strategic decisions for the company.

I have asked Tim Cook to be responsible for all of Apple's day to day operations. I have great confidence that Tim and the rest of the executive management team will do a terrific job executing the exciting plans we have in place for 2011.

I love Apple so much and hope to be back as soon as I can. In the meantime, my family and I would deeply appreciate respect for our privacy. Steve"


Apple's Stock During Past Jobs Absences: A Buying Opportunity?

With this news, the number one question on investors' minds is: buy or sell? The natural expectation is for shares of AAPL to sell-off on this news. After all, that's exactly what happened the last two times Jobs took a medical leave of absence, in 2004 for pancreatic cancer surgery and in 2009 for a liver transplant. And already today, shares of Apple trading in Germany are down 7%.

Jobs' 2004 Absence: AAPL was down around 2% the day of the announcement of his surgery. Shares ended the week down almost 8%. One month later, shares had recovered the losses. One year later? Shares doubled.

Jobs' 2009 Absence: AAPL initially traded down 6% the day news broke that Jobs was leaving but ended the day down 2%. What happened to Apple's stock during the six months Jobs was gone? Up over 66%.

Taking a quick look at the StockTwits stream for AAPL shows that investors are readily expecting a dip in shares on the news again this time around. Yet what you should also take note of is the resounding 'buy the dip' mentality. This is probably most attributable to the fact that so many people witnessed shares eventually rise the last time Apple's CEO had to take some time away.

If you drill down specifics, Jobs' departure does not really have an immediate impact. Tim Cook, the company's COO, will take over operations just as he did last time Jobs stepped away. Cook, known for his operational prowess, will continue to execute the company's roadmap. Consider this: Apple's product pipeline for the entire year is largely already in place. Per Engadget:

- The Verizon (VZ) iPhone was just announced & will be released soon

- iPad 2 is currently in development and is rumored to be released in the early Spring

- The next generation iPhone 5 is also rumored to be in development with a potential summer release

- After that, it makes sense that they develop an iPhone capable of running LTE/4G data speeds

And on top of that, you have the usual refreshes and revamps to iPods, Apple TV, as well as the iMac and Macbook computer lines. The point here is simple: Jobs' absence changes little in terms of product roadmap and 2011 plans.

Yes, obviously the CEO is hugely valuable to the company, but Cook has already proven once that he can handle things while Jobs is gone. Investors have become more familiar with Cook as well as other key figures at the company, including Jonathan Ive of the design team. While Jobs is Apple's figurehead, he is not the only person there.

The largest potential negative of Jobs' temporary departure revolves around his attention to detail and his ability to envision the 'next big thing.' In that sense, he will certainly be missed. The more pressing concern here would be if Jobs extends his temporary absence into a permanent one.


Jobs' Second Medical Leave In Two Years

For investors, there is arguably no one more important to a stock than Steve Jobs. The man IS Apple. He is a visionary and responsible for the company's impressive turnaround over the years. At the same time, he is obviously human.

Back in 2008, the CEO started to noticeably lose weight and rumors started surging that his health was in decline. Apple investors will recall that Jobs previously battled pancreatic cancer. In January 2009, Jobs took a leave of absence and posted a letter about it. He returned about six months later after a liver transplant and the company flourished.

In his two letters (in 2009 and now in 2011) there is one common thread: he is still technically in charge. In 2009 he wrote, "I will continue as Apple's CEO during my recovery." And now in 2011 he writes, "I will continue as CEO and be involved in major strategic decisions for the company." And as we've outlined above, the company's pipeline is largely in place for the rest of the year.

However, a second leave of absence in a few years has to spook investors somewhat. We're not here to speculate as to what might be wrong with Steve. But investors in one of the largest companies in the world will chime in that they deserve the right to know what's going on with the CEO of a public company.

The crux of the situation is that Jobs' departure in the immediate term doesn't hurt Apple. The company rebounded just fine during his last departure. Jobs' absence is most concerning from an investment standpoint if he were to make it permanent. And with each additional medical leave, speculation mounts.


Everybody Loves AAPL Shares

Jobs' health will once again become THE talking point for the stock. Before this news came out, zero sell-side analysts had a 'sell' rating on the company. Zero.

Of all the stocks and hedge funds we cover on MarketFolly.com, Apple is by far and away the most widely owned by hedgies. David Einhorn of Greenlight Capital established his AAPL position way back at $248 per share and he was arguably a late-comer to the AAPL party. So many prominent managers own AAPL as a top holding that we had to create a separate post for the top hedge funds that own Apple.

And already, Goldman Sachs is out defending shares of the company as they anticipate a wave of sellers this morning and in the near-term. They re-iterated keeping AAPL on their Conviction Buy List and buying on any weakness with a 12-month price target of $430. Goldman's Bill Shope outlines their rationale:

"1) The management team remains strong, and we believe investors would embrace Tim Cook in any potential succession plan;

2) Apple's $51 billion in cash and investments could be partially distributed to shareholders to stabilize the shares;

3) The multiple of 15.1X already represents a significant historical discount, and we see no direct risk to earnings from this move."

It should also be noted that Goldman identifies "uncertain management succession plans" as a potential key risk for the future. But in the near-term, it's very clear that they still like shares on any expected weakness. You can read the full Goldman Sachs note on Apple here and can visit our previous post on Goldman identifying AAPL as the most important stock to hedge funds.


What It Means For Investors

Shares of AAPL will undoubtedly have a cloud of uncertainty hanging over them for some time. The same thing happened when Jobs took medical leave in 2009. Investors will also carefully consider that the company is set to report earnings this week as well. Apple often 'sandbags' guidance and then blows out the numbers in its report.

Will the company's earnings be able to overshadow Jobs' departure? It's doubtful, especially when you consider that analysts on the conference call will largely focus on Jobs. And if Apple's past stance on commenting on Jobs' health is any indication, they'll be beyond tight-lipped.

The main takeaway here is that Apple has already survived a Jobs medical leave before and with the company's current product roadmap in place, it can do so again. At the same time, investors rightfully have to be concerned about Jobs' long-term future at the company. His health is the most important thing here and as he stated in his 2009 letter, "I will be the first one to step up and tell our Board of Directors if I can no longer continue to fulfill my duties as Apple's CEO."

In the near term, the company will be fine. It's the long-term that investors have to be concerned about. It will be most intriguing to see what various hedge funds do with their AAPL positions pending this development. A mass exodus by hedge funds could send shares spiraling. After all, it is one of the most widely owned stocks in the market and we've identified the hedge funds that own lots of AAPL in a separate post.

* If you found this article useful, you can find much more analysis on what the top hedge funds are investing in by receiving our free updates via email or via RSS reader.

Top Hedge Funds That Own Apple (AAPL)

Continuing our coverage of Apple (AAPL) today, we present the top hedge funds that own Apple. After all, we've previously highlighted how Apple is the most important stock to hedge funds.

Without further ado, here is the breakdown of the top hedge fund owners of Apple as of September 30th, 2010. This data was taken from the most recent SEC 13F filings. The newest 13F's won't be released for about another month at which point we'll get an updated look as to who owned AAPL at 2010 year-end, so this data should be taken with a grain of salt. Keep in mind that MarketFolly.com will of course be analyzing the latest hedge fund positions in our newsletter, Hedge Fund Wisdom.


Hedge Funds That Own The Most Apple (AAPL):

1. Stephen Mandel's Lone Pine Capital: Owns 0.29% of AAPL (2,707,106 shares)

2. David Shaw's D.E. Shaw Investment Management: 0.26% of AAPL (2.39 million shares)

3. Jim Simons' Renaissance Technologies (RenTec): 0.21% of AAPL (1.96 million shares)

4. Shumway Capital Partners (Chris Shumway): 0.2% of AAPL (1.8 million shares)

5. Rob Citrone's Discovery Capital Management: 0.17% of AAPL (1.5 million shares)

6. Philippe Laffont's Coatue Management: 0.17% of AAPL (1.5 million shares)

7. Lee Ainslie's Maverick Capital: 0.15% of AAPL (1.3 million shares)

8. Chase Coleman's Tiger Global: 0.14% of AAPL (1.25 million shares)

9. John Griffin's Blue Ridge Capital: 0.13% of AAPL (1.22 million shares)

10. David Einhorn's Greenlight Capital: 0.09% of AAPL (837k shares)

11. Kleinheinz Capital Partners (John Kleinheinz): 0.09% of AAPL (782k shares)

12. Ken Griffin's Citadel Investment Group: 0.08% of AAPL (753k shares)

13. David Stemerman's Conatus Capital: 0.08% of AAPL (714k shares)

14. Kingdon Capital Management: 0.08% of AAPL (701k shares)

15. Jeff Vinik's Vinik Asset Management: 0.07% of AAPL (621k shares)


Of the list above, you'll notice an overarching theme: Tiger Cubs. Of the top hedge fund owners of AAPL, seven are 'Tiger Cub' hedge funds. These are funds that employ long/short equity strategies similar to those learned from the respective manager's time working at Julian Robertson's Tiger Management. This strategy focuses on intensive fundamental research and often focuses on value or G.A.R.P. (growth at a reasonable price) investments.

Singling out a few of the other managers on the list above, we previously detailed that Apple is Kleinheinz Capital's top position when we examined their letter to investors. Additionally, in the past we've touched on David Einhorn's rationale for buying Apple as his cost basis is around $248 per share.

Earlier this morning we highlighted Goldman Sachs' research on AAPL where they kept the stock on their Conviction Buy List despite CEO Steve Jobs' medical leave of absence. Additionally, we highlighted in-depth what this means for AAPL investors.

* If you found this article useful, you can find much more analysis on what the top hedge funds are investing in by receiving our free updates via email or via RSS reader.

Goldman Sachs Note on Steve Jobs & Apple (AAPL): Still on Conviction Buy List

Goldman Sachs is out with an updated research note on shares of Apple (AAPL) pending the news that CEO Steve Jobs has taken another medical leave of absence. Today we are focusing on AAPL on the site because according to Goldman, it is the most important stock to hedge funds.

Practically all of the major hedge funds we track have exposure to Apple and for many, it is their top position. We've compiled a list of the top hedge funds that own AAPL here. Combine this with the fact that Steve Jobs IS Apple, you have a potentially volatile situation on your hands. Due to Jobs' medical leave of absence, Goldman expects shares to see near-term weakness. However, they view any dips as a buying opportunity and maintain the stock on their Conviction Buy List.

Goldman's 12-month price target on shares of AAPL is $430. Per the report, "Our target price represents a 19x P/E multiple on our above-consensus CY2010 EPS estimate or a 19% discount to Apple's five-year average multiple of 23x."

Their research essentially outlines 3 reasons that the long-term fundamentals for Apple are still in tact:

1. Tim Cook is a proven leader and step in if Jobs' absence ever became permanent

2. Apple has a massive cash hoard of $51 billion

3. The stock is already trading at a historical discount and Goldman sees no threat to earnings


Embedded below is Goldman Sachs' full research note on Apple (AAPL):



You can download a .pdf copy here.

For more on AAPL, head to our in-depth post on what this means for Apple investors, as well as our summary of the hedge funds that own the most AAPL shares.

Technical Analysis of Apple (AAPL): Price Target & Key Levels

Given that Apple (AAPL) just reported blowout earnings, Adam over at MarketClub wanted to take a look at the stock and sent out a technical analysis video on AAPL. In it, he pulls up the monthly candlestick chart and identifies $80 and $200 as key levels. From 2008 until early 2010, Apple traded in this range as it sold off hard throughout the crisis but then rebounded stronger. He says this area has created an 'energy field' as the stock consolidated (but that's quite a wide consolidation if you ask us).

The reason he outlines those two levels is to establish a price target. Subtracting the $80 level from the more recent $200 level, you get a 120 point move. Tacking that on top of the $200 level, he feels that a logical price target for Apple is $320 (200 + the 120 point consolidation). On a fundamental basis, this price target could be reasonable (after all, the company is firing on all cylinders.) However, we're not quite sure the technicals set up for such a move as you have to realize Apple has essentially run straight up from $80 to $258 with only one major pause. You can view Adam's video on Apple here.

We think the most notable bit of information to takeaway regarding AAPL's technicals is the $215-220 area. This level was previously an area of resistance and Apple has since blasted through it. Look for that level to serve as support going forward. In an ideal situation, this would be a great place to enter AAPL shares long if you ever see a pullback. Adam doesn't think shares will trade below that level and we'd concur. There's no denying Apple is a monster of a company right now. Not to mention, tons of hedge funds we track hold AAPL as one of their top positions. And you can bet they're not long for the technicals; they're in it for the fundamentals. Click below to watch the technical analysis video on Apple:

Apple (AAPL): Are The Market Generals Falling?

That's the question on a lot of people's minds as the market has sold off and some of the market leaders have been hit hard. The guys at MarketClub take a look at the technical picture in their recent video on Apple (AAPL). While it's one thing to look at the stock market as a whole, many like to watch the market leaders for the next clue. Apple has undoubtedly been one of the market leaders, having skied from $80 to north of $200 per share.

However, Apple has started to sell-off recently amidst the announcement of its new iPad media device. Apple is aiming to revolutionize the book/media space with the iPad & iBookstore like they did music with the iPod and iTunes. The fact that shares of AAPL sold-off is not really a big surprise though, given that it has almost always been a "buy the rumor, sell the news" kind of stock. Not to mention, it's had a monstrous run. Lastly, practically everyone already owned it, as it was the sixth most popular holdings amongst hedge funds.

The chart is starting to show some definite weakness and they outline $185 as a key level in AAPL. If it breaks down below that, things could get ugly:



Check out their technical analysis on AAPL for a possible 'tell' from the market generals. It doesn't look good right now because as we mentioned on Friday, the Nasdaq broke a major trend line too.