Apple's multiple LT compound capital alchemy is repurchase, 41.9% shares reduced in 12 years

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Share repurchase in my books

I suggest that friends read the last 5-6 sections of the book “The Rules of Super Growth Stocks Investing” and the last 6-7 sections of the book “The Rules of 10 Baggers” about stock repurchases, and then come back Read this article again, it will be helpful to everyone.

Three indicators of Apple in past 12 years

Number of shares outstanding

At the end of December 2012, Apple had a total of 26.522 billion shares outstanding; by the end of September 2024, it had been reduced to 15.408 billion shares. Over the past nearly 12 years, Apple’s outstanding shares have decreased by a full 41.9%! (See Figure 1 below) Excluding inflation or exchange rates, this means that over the past 12 years, Apple’s earnings per share have automatically increased from 1 yuan to 1.721 yuan (1/(1-0.419). Please note that this number does not look What do you think? Big numbers are deceiving!

Figure 1: Apple’s outstanding shares over the past 12 years (from macrotrends.net)

Net profit growth trend

Apple’s net profit in 2012 was $41.73 billion, and in 2024 it was $93.74 billion, a total growth of 124.63%, with a compound annual growth rate of 6.98% (see Figure 2)

Figure 2: Apple’s net profit growth trend over the past 12 years (from macrotrends.net)

Revenue growth trend

In 2012, Apple’s revenue was US$164.68 billion; in 2024, Apple’s total revenue will be approximately US$391 billion, a total growth of 137.43%, with a compound annual growth rate of 7.47% (see Figure 3)

Figure 3: Apple’s revenue growth trend over the past 12 years (from macrotrends.net)

Reasons behind Apple is poplular among Wall Street

Criticisms of Apple from general public

Many investors questioned the lack of innovation in Apple products in recent years. The annual revenue growth rate is even in the single digits, which is worse than many traditional industries. It is really unworthy of the title of the world’s largest listed company by market value. They are even more puzzled as to why Apple The company’s stock price still rises sharply every year, which is really unreasonable.

The opinions of general public, especially the retail investors, vary from person to person.

Why do smart people do the opposite?

However, have you ever thought about it? Why do Wall Street and large fund investors, who include the world’s most savvy investors, still love Apple’s stock? Apple’s aggressiveness in stock buybacks is not the only reason (I’ll talk about other reasons later), but it is definitely the most important reason.

For a company with mature and stable business and popular products, after buying it, just sit still and hold it for a long time, even if the company’s profits stagnate, Over the past 12 years, the proportion of investors’ total Apple shares’ equity has increased by 1.721 times, on the surface. You can automatically enjoy an annualized return on investment of 4.58% on earnings per share (Is 4.58% too small ? Of course there are other more surprising benefits, which I will discuss later). Of course, it is one of the favorite investment targets of large funds, Wall Street, and pension funds.

Where do LT multiple profits come from?

The complicated factors driving Apple’s stock price

Please note that the previous figures are based solely on the assumption that Apple does not make any progress, with neither net profit nor revenue increasing in the past 12 years. But the reality is of course not like this. In fact, the following factors must be taken into account:

Net profit growth: Apple’s net profit was $41.73 billion in 2012 and $93.74 billion in 2024, a total growth of 124.63% and a compound annual growth rate of 6.98% (see Figure 2)
Revenue growth: In 2012, Apple’s revenue was $164.68 billion; in 2024, Apple’s total revenue will be approximately $391 billion, a total growth of 137.43%, with a compound annual growth rate of 7.47% (see Figure 3)
Cash dividends: During the 12-year period, each share received a total dividend of 37.76, and the dividend will be increased every year.
Stock splits: 4-for-1 split in August 2020 and 7-for-1 split in June 2014, which would result in an investor holding 28 shares for every 1 share they hold.
Capital gains on share price: Over the 12-year period, the share price increased by 1,234%
Don’t forget the most important thing: the “percentage” of Apple’s total outstanding shares held by long-term holders of Apple’s stock will automatically increase due to stock repurchases. The proportion of Apple shares held has actually “automatically” become 1.721 times.

The most successful capital alchemy

I won’t calculate the results for you─I can only tell you that the multiplication effect of “long-term ‘multiple profits’” is very amazing, which also explains Apple’s amazing capital Alchemy; and it is still in progress!

Assuming that the number of Apple shares you held 12 years ago accounted for 0.00001% of Apple’s total outstanding shares, 12 years later, the number of Apple outstanding shares you hold will automatically account for 0.00001721% of Apple’s total shares! (Note that your total shareholder equity would be multiplied by 1.721 in this case; in contrast, common stock splits have no effect on shareholder equity at all.

Closing words

The case of Apple is one of the greatest repurchase and capital alchemy in human history.

An investor invested 1 dollar 12 years ago, which would now become 13.34 dollars after 12 years of investment; the annualized rate of return (IRR) during the investment period is 24.1%. This is Apple’s long-term, multiple-return capital alchemy!

Most investors do not understand the truth, are unwilling to spend time to conduct in-depth research on the complicated factors behind the capital market, do not want to invest for the long term, and what is worse is that they just follow the crowd.

The crux of all the problems is, as I quoted in the preface of the book “The Rules of Super Growth Stocks Investing“: Buffett told Bezos the famous saying “Because no one wants to get rich slowly.”

Repurchase and capital alchemy — credit: Ideogram

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