23 Dec

Why did Tudor Investment buy Apple?

WRITTEN BY Samantha Nielson

Why did Tudor Investment buy Apple?

Paul Tudor Jones II in 1982 founded Tudor Investment Corporation, which is today a leading asset management firm headquartered in Greenwich, Connecticut. The Tudor Group, consisting of Tudor Investment Corporation and its affiliates, is involved in active trading, investing and research in assets across fixed income, currencies, equities and commodities asset classes and related derivative and other instruments in the global markets for an international clientele. Tudor has around $13.6 billion in assets under management. The investment strategies of the Tudor Group include, among others, discretionary global macro, quantitative global macro (managed futures), discretionary equity long/short, quantitative equity market neutral and growth equity.

It started positions in Apple Inc (AAPL), Beam Inc (BEAM), Infosys (INFY) and Intercontinental Exchange Inc (ICE). It sold Merck & Co (MRK) and Forest Laboratories Inc (FRX).

Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).

Why buy Apple Inc (AAPL)?
Tudor bought a 2.52% position in Apple Inc in 3Q 2013.

Apple’s shares were recently lifted by the announcement of a long-awaited deal with China Mobile. Both companies entered into a multi-year agreement by which iPhone 5s and iPhone 5c will be available from China Mobile’s expansive network of retail stores as well as Apple retail stores across mainland China beginning January 2014. Apple is expected to benefit from this deal with China Mobile, which  is the world’s largest mobile services provider by network scale and subscriber base, serving over 760 million customers.

Apple posted 4Q 2013 revenue of $37.5 billion and quarterly net profit of $7.5 billion, or $8.26 per diluted share compared to revenue of $36 billion and net profit of $8.2 billion, or $8.67 per diluted share, in the year-ago quarter.  International sales accounted for 60% of the quarter’s revenue. It generated $9.9 billion in cash flow from operations and returned an additional $7.8 billion in cash to shareholders through dividends and share repurchases during the September quarter, bringing cumulative payments under its capital return program to $36 billion. In terms of outlook for 1Q 2014, it is expecting revenue between $55 billion and $58 billion.

iPhone unit sales climbed 26.0% year over year with unit sales up sharply year-over-year especially in developing markets such as Latin America, the Middle East, Russia and India. Apple launched the new iPhone 5s and iPhone 5c in September that boosted its sales. iPad unit sales remained flat on a year-over-year basis, but declined 4.0% sequentially. It saw robust year-over-year sales growth in Japan, Russia, the Middle East and strong back-to-school demand for iPad in the U.S. and Canada. The iTunes Stores generated record billings of $4.4 billion in the September quarter due to continued strong growth in sales of applications. The quarter’s iTunes billings translated quarterly iTunes revenue $2.4 billion, up 15% from the year-ago quarter. Retail revenues in the quarter rose 6.0% year-over-year and 10% sequentially to $4.47 billion. At the end of 4Q, Apple had 416 stores worldwide, of which 162 are located outside the U.S. It is projecting a total of approximately 30 new store openings in fiscal year 2014, about two-thirds of which will be outside the U.S.

Despite robust earnings, Apple faces competition from Samsung, Microsoft, HTC and other handset makers. However, its innovation capabilities, broad product portfolio, high dividend and share buyback programs will continue to drive the stock ahead.

Why did Tudor Investment buy Apple?

Why did Tudor Investment buy Apple? Why did Tudor Investment buy Apple? Why did Tudor Investment buy Apple?

Born in Memphis, Tennessee, Jones then went to University of Virginia, earning an undergraduate degree in economics in 1976 as well as a welterweight boxing championship. He then went on to work for Eli Tullis, a successful cotton speculator at the New York Cotton Exchange. One of Jones’ earliest and major successes was predicting Black Monday in 1987, tripling his money during the event due to large short positions.

As of March 2013, founder Paul Tudor Jones II,  was estimated to have a net worth of USD 3.6 billion by Forbes Magazine and ranked as the 108th richest American and 376th richest in the world. With this financial success he founded the Robin Hood Foundation, a philanthropic organization mainly backed by hedge fund operators.

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