The origin of this post
After reading my post of “Apple’s multiple LT compound capital alchemy is repurchase, 41.9% shares reduced in 12 years“, a long term friend Peter was inspired to write to me seriously and communicate with me on Apple repurchase and many others. Since Peter’s question was very good, in addition to replying to him immediately, I also reorganized my reply to him into the article you see now.
Thanks in advance to Peter! The following are the questions raised by Peter and my views, which I would like to share with readers.
Once again, I have stated on the homepage of this blog when it was first launched four years ago (the words are still there now) that this blog is not a stock club. If you have this wrong expectation, please do not read my blog, because it will make you unhappy. In addition, I do not make a living by web traffic or click rates, and I have no interest in my market exposure or fame at all.
This blog only wants to express my personal opinions, experiences, and views on US stock investments. “Pleasuring readers” is never within my consideration; nor am I obligated to respond to unreasonable requests. Depending on the situation, this website may start charging for articles someday to stop a bunch of sour netizens from taking advantage of reading, or it may shut down all articles tomorrow or stop publishing forever.
This blog shut down comments feature
Q1. Your website has disabled the message function, so I have to write an email to ask you for advice.
Hello Peter, I am very happy to hear from you. I made up my mind to turn off my blog’s comments because there are too many irrational messages, advertisements, spam, harassment, attacks, unreasonable and verbal abuses that make me overwhelmed. “Many people” don’t do their homework or read books, but just come and leave random messages.
With just three or five words, they force me to answer questions, ask about the clear cards, and directly ask whether a certain stall can be bought? How much price can be purchased? If the answer was not to his liking, his tone would be very bad, as if I owed him something; so I decided not to tolerate it anymore.
I thought that the contact information was still listed on my website and blog, so it wouldn’t affect readers who really wanted to communicate with me. In the past, I would almost always take the time to respond to each one, which took up a lot of my time every day. But later I found that there were more and more irrational people who took everything for granted, so I made this decision.
Apple’s repurchase
Q2. I bought a small amount of Apple stock 3-4 years ago, and now I have made more than 100% profit without taking into account dividends, and I did nothing. After reading your article, I found out that the main reason for the rise was stock buybacks. Is this a profit trend? Since there are no more stocks with significant growth in stability, stock buybacks are indeed a factor in long-term investment profits.
Apple is a rare wealth-making machine in human history through its stock repurchases. It is also the company that has been ranked first in market value for the longest time in the history of the US stock market. There are many reasons for this. I have invested a lot of time in researching this company.
To be honest, if I really wanted to write down all my thoughts, I could probably write a 500-page book. However, to make a long story short, Apple operates in a very different way from other large US companies (there are too many implications behind this sentence alone), which is why it stands out.
What I want to say is that investors have been clamoring to find companies that will not lose money, whose stock prices will rise steadily, whose capital investment is safe, whose reputation is good, whose prospects are promising, whose dividends are fixed, whose products are good, and whose management teams are excellent; because you can’t have your cake and eat it too. Considering this, there are not many such companies. But if there is, Apple says it is second, and no company dares to say it is first.
Nvidia’s capital operations
Q3. I would like to ask you that Nvidia also announced in August this year that it would repurchase a large amount of shares (50 billion US dollars). I also bought a small amount when the stock price fell back to 100-110 this year. If a company like Nvidia is still growing rapidly, , plus stock repurchases, wouldn’t that be even more of a bonus?
In terms of capital operation, Nvidia ranks at the very bottom of the S&P 500 stocks (I’m being polite, to be more precise I would say the first few at the end), and lags far behind other companies. It’s eye-catching, but I don’t care much about it, but it’s now the third largest company by market value, which doesn’t quite pass the test in this regard (my personal opinion).
Investors have not raised any questions because Nvidia’s stock price has been rising in the past two years, and most people do not understand that the power of long-term compound interest and capital operations can have an incredible impact on a company’s long-term development and the interests of its shareholders.
If things continue like this, shareholders will definitely speak out. There are still many capable and clear-headed people on Wall Street, but they have not yet started to protest. This is a very broad topic, and I will explain it one by one if I have time. A $50 billion stock repurchase does not mean much to Nvidia right now. Its market value is similar to that of Apple, which is worth hundreds of billions of dollars.
What is capital operation?
In Sections 6-7 of my book “The Rules of 10 Baggers“, “Five Capital Operations Have a Strong Impact on Stock Prices”, the entire section is dedicated to introducing the capital operations of enterprises.
The content will not be repeated here. Interested investors can refer to the contents of my book. And I also specifically emphasize that capital operations are very important for all listed companies.
Buffett sells off large of Apple holdings
Q4. Buffett also theoretically knew that Apple still had an upward trend, so why did he sell more than 2/3 of his shares? Was it to hand over the baton or was there another reason? What do you think?
Don’t worry too much about Buffett selling Apple. He still keeps a large position, which is still the largest position in Berkshire. If you recall, from January to April 2024, Apple was the only stock among the super-large technology stocks that fell sharply. Many people began to look for reasons for it and echoed the idea of selling it quickly.
Most people suspected that it was because AI lagged behind its competitors (I don’t quite agree with this), but later the answer came out, it was because Buffett sold a lot of Apple shares, because Buffett has nearly 6% of Apple’s outstanding shares! If he sold 1/3 or 1/2, it would certainly cause a drop.
Please note that 6% of Apple’s outstanding shares need to be sold off, a little bit each day during the first quarter. Due to ethical and regulatory considerations, it is impossible to sell them all at once, as this would cause market panic. The same situation also happened to Bank of America, which is owned by Buffett.
Buffett said in his shareholder letter that he bought “very early” and that the prices are now very low, and that he will hold Coca-Cola and American Express, which account for a large proportion of the company’s shares, forever. He said that he would hold the stocks he bought forever.
When Buffett sold Apple in the first quarter, he did not mention that Apple’s fundamentals were not good or getting worse (if that was the case, there would be cause for concern), so people could deal with it with a normal attitude. Based on my subsequent research and personal opinion, he had several reasons:
- (1) At its peak, Apple accounted for nearly half of Berkshire’s total stock value. This has been repeatedly questioned by shareholders in recent years, and he must respond.
- (2) After making a substantial profit from his holdings, he will usually choose to sell some of his holdings and keep some. BYD is a recent example of this.
- (3) The Buffett indicator of U.S. stocks has been above 200 in the last one or two quarters. According to his experience, the valuation of U.S. stocks is too high and there are certain risks.
- (4) The impact of US tax laws. During the US presidential election, various parties competed to propose tax law amendments (Trump, who was friendly to business, at the time, was not favored to be elected), which may lead to large capital gains after selling stocks. increase.
- (5) Other reasons, such as he may be preparing for a large merger and acquisition, or it is said that he is getting old and wants to leave more cash for Berkshire’s successor to use.
I wrote an article a few months ago and responded to similar questions from one of my blog reader: “Is Buffett no longer hold for long haul? TSMC, HP, and US Bancorp cases study“
Tesla’s stock price hits new highs
Q5. I recently saw that since Trump was elected, Tesla’s stock price has skyrocketed and hit a new high. Of course, this is probably an hype.
Personally, I care more about the fundamental performance of the company. I agree that TSLA’s rise is entirely due to Trump’s election, Musk bet on the right side, and he is good at media manipulation.
In addition, after Trump was elected, TSLA rose by more than 80%, which was entirely based on Musk’s robotaxi and AI (including his X.ai, robots, etc.), which Musk himself did not shy away from. I have emphasized this many times – investors who are not optimistic about Tesla’s robotaxi, robots, AI and other long-term prospects should not buy Tesla’s stock.
TSMC CEO C.C. Wei recently publicly stated that Musk told him that “multi-functional robots are the direction he wants to work on, not cars.”
Another positive factor is that Musk’s other related companies, in addition to X, SpaceX, Starlink, X.AI, dojo, and Optimus are all operating successfully, which has greatly increased his personal influence and his valuation has repeatedly reached new highs. But since these companies are not listed, investors will have empathy and place their hopes on Musk’s only listed company.
Tesla in my books
I’ve discussed this company in my last two books. In order to avoid repeating the content, the content mentioned in the book will not be repeated here:
The book “The Rules of Super Growth Stocks Investing“:
- 1-2
- 4-2
The book “The Rules of 10 Baggers” spends a lot of space and has a very in-depth discussion of this company, especially sections 5-8. include:
- 3-3 Electric Vehicle Industry
- 5-8 Tesla
- 7-2 How Tesla Comes Through
Alphabet’s Google’s Willow quantum chip
Q6. Just like Google’s record high today, you said that some of these things like Google’s quantum computer are hyped, why is the market dreaming? Or will the market continue to have funds flowing in if interest rates are cut?
Based on my personal research and opinion, quantum computing is still very far away from commercialization. We just need to pay attention to it but don’t have to follow the market. For details, please see my previous post of “Google’s Willow chip rally related quantum computing stocks. Is it justified?” and “Quantum computing current progress and related stocks“
Will AI cause a stock market bubble?
Q7. Or will AI really cause the stock market to gradually enter a bubble?
AI is real, not a bubble, and this has been proven in many aspects. But if the AI craze is to continue, we must find areas other than hardware chips where artificial intelligence can really make companies money, such as the use of software. This is a long-lasting technological invention or innovation. Otherwise, shareholders will wake up one day and question why the company spent so much money, but I can’t see the returns. Here is a living example: Microsoft.

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