Sometimes, we find ourselves truly on the fence about a stock. We don't know whether to love it or hate it – and it drives us crazy. I'm in that situation with Apple (Nasdaq: AAPL).
Until I bought a first-generation iPhone, I hated Apple. I looked at its legions of fans and shook my head in disgust. Now, just five or six years later, I'm on my second iPhone, and planning on purchasing a third when my current contract is up.
Why I love it
This will sound ridiculous, but I have an iPhone 3GS right now, instead of a phone running Google's (Nasdaq: GOOG) Android OS, because the zoom is so much better on the iPhone.
Let me explain. Before deciding whether I'd upgrade to the iPhone 3GS from the first-generation version or make a switch, I tried a friend's Android phone. To my surprise, the web browser was disappointingly clunky. In fact, the touch screen was so unresponsive that I was actually frustrated. At that point, I became an iPhone user for life. It almost doesn't matter that Android phones have improved dramatically since then. I'm already hooked on the iPhone.
I don't own an iPad only because I've purposely avoided even trying it. I believe that if I use one even for a few minutes, I'll want one so badly that I'll have to buy it. As long as I can avoid trying it, I won't know how great it is, and I won't need to make that purchase.
Looking ahead, I'm rather excited about the upcoming iPhone 5, since that will likely be my next phone. In the near future, I truly believe the iPhone 5 and the next version of the iPad will fuel Apple's earnings and sales growth quite nicely for at least a couple of years, which should lead to a higher stock price in the future.
Does that mean all's well in Cupertino? Not so fast.
Why I hate it
If I love the iPhone and think the share price is going higher, why don't I buy the stock? $76 billion. That's the amount of cash, short-term, and long-term investments on Apple's balance sheet. Why in the world does a company that doesn't pursue acquisitive growth have that much cash?
I'd love to see a huge one-time dividend, a healthy quarterly dividend, or even share buybacks. Heck, I don't even own the stock, and I'd still like to see it. It's rather annoying to see a company refuse to return cash to shareholders when it's swimming in filthy lucre.
Based on past data, the last time Apple bought back any shares was a $26 million purchase in 2003. Even worse, it last paid a dividend in November 1995. If Apple keeps retaining its earnings without pursuing major acquisitions, its cash balance will eventually break $100 billion. Many might think that Apple simply has to pay it out at that point, but I'm not holding my breath. History suggests that Apple's priorities don't include share buybacks or dividends.
Foolish bottom line
Until I can appreciate the company's innovative products and look beyond the cash, I won't be buying in anytime soon. It pains me to say that, because I actually believe the share price will go up in the next few years as the company rolls out more awesome products. However, I simply cannot get myself to buy shares, because I don't believe this company cares about me – or any of its shareholders, for that matter.
