Facing the Pain of Souring Apple Shares

It has been reported this week in the Wall street Journal that "Coping With the Pain of Souring Apple Shares". The report has been analyse the Apple troubles and situations, the effect to shareholders and the strategy from shareholders. In my opinion, this case is the most suitable one relative with the last week topic of “International Value Management”.

Apple Inc. recently staying on the big trouble on the stock market in the U.S. their shares from the peaking at $705.07 on 21st of Sept has fallen to the $453.62 at 1st of Feb this year. This fall has affect about 60%of actively managed U.S. stock mutual funds that invest in big companies owned at least some Apple shares at the end of the year. However, it is not all of shareholders took losses. The solution of Apple Inc. to protect their shareholder is creating a total return, including dividends, of about 28% annually over the past five years, versus 4% for the Standard & Poor’s 500-stock index.

Facing this pain, there are four reactions occurred on professional money managers and small investors. They are Balling out, Staying the course, Seeing a cheap stock, Sitting out.

Some investors are selling their stakes in order to getting away from the pain. Some chosen staying the course and hoping the future development, this reaction still is assuming the risk for further loss. Some chosen Sitting Out. Because Apple's drop provides some vindication for the few money managers who didn't hold Apple during its bull run and saw their portfolios trail. And lastly, some investors have planned to change to the cheap stock. Mr Barr said he still believes the stock is cheap and that the company might see hot earnings growth as it introduces new products, such as a rumored cheaper iPhone or television set.

In order to finding the right reaction, it is necessary to consider about the share values and time value of money. The traditional methods to work out the time value by  calculation of EPS and ROCE. however, nowadays, managers is more accurately to using method of NPV. 

However, facing the pain of Apple Inc., it is important adopt some changes for organisation. Creating value might be the possible ways to holding the old investors and attracting news investors. additionally, there are five possible ways to creating values: 
1. Increase the return on existing capital
2. Raise investment in positive spread units
3. Divest assets from negative spread units to release capital for more productive use
4. Extend the planning horizon
5. Lower the required rate of return

Mr. Mulholland said that " It's been a headache, but not a cancer." It shows that many investors is hoping the reborn of Apple. therefore, the pain of Apple Inc. is probably not suffering for long time.