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A $17 billion windfall for AAPL investors

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Apple's chief executive Tim Cook almost casually noted during the company's earnings call this week that Apple had spent another $17 billion on stock buybacks in the September quarter, over three times as much as it spent in either the previous June quarter or its year-ago September quarter.

"Our strong results continue to generate significant cash and we're extremely happy that this has enabled us to make substantial investments in Apple's future, while retaining — while returning cash to our shareholders," Cook stated. "We had executed aggressively against our share repurchase program, spending $17 billion in the September quarter alone and $45 billion in the last year."

The unexpected windfall for shareholders is not only huge, but was also executed differently: rather than relying mostly on banking partners to execute an "Accelerated Share Repurchase" on its behalf, Apple performed almost half of the buybacks on its own, spending an all-time record $8 billion to buy back shares on the open market while issuing a smaller than usual $9 billion on its fourth ASR.

Curiously, Apple's massive quarterly buyback—involving at least three times the capital that the company is purportedly spending on its years long, massive Campus 2 construction project (below)—was all but ignored by the same members of the media who had earlier found it newsworthy that a large man from Canada could destroy an iPhone 6 Plus using only his hands.
Apple's unexpected stock buyback acceleration


Apple's stock is now hovering around an all time high, having appreciated 37 percent over just the past year. However, for half of the last twelve months (and throughout all of 2013), Apple shares have languished at prices from 60 to 75 percent of their current valuation.

Despite recent gains, Apple's current price is only 3 percent higher than it was two years ago at the launch of iPhone 5, even as the company continues to syphon off the majority of all profits in the PC, mobile phone and tablet markets with a series of blockbuster hits that have crushed struggling rivals' beleaguered efforts to follow its lead, from Microsoft's Surface to Google's Moto X to Amazon's Fire Phone and Samsung's Galaxy lineup.

AAPL vs Wall Street


Since initiating its buyback program two years ago, Apple has worked to aggressively use its capital to take advantage of irrational stock market valuations in what has turned out to be the largest stock repurchase program (setting multiple records both per quarter and in trailing twelve-month buyback activity) since the SEC enhanced the transparency of issue repurchases in 2005, and undoubtedly the most successful.

Some shareholders, including vocal activist investor Carl Icahn, have regularly opined that Apple should do even more to buy back its own shares, estimating that the company's appreciation over the last two years is just the beginning and that it is on a trajectory to again double in value in the near term.

"Apple remains dramatically undervalued," Icahn wrote in an 'open letter' to Apple's executive team, stating, "Our valuation analysis tells us that Apple should trade at $203 per share today, and we believe the disconnect between that price and today's price reflects and undervaluation anomaly that will soon disappear."

Apple's liberal spending on buybacks, and its increasing focus on open market purchases, indicates that the company agrees that its stock remains incredibly undervalued by investors.

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