Apple Proves Value Investors Like Tech

Many people know my personality is similar to my investing style...I tend to go against the grain.  As a techie, I don't love the Apple phones for a technical reason it's a closed source ecosystem. Unlike open source devices, Apple prefers that you use only their software and products. I have to remind people that Apple did not invent putting things in the cloud, sending files/messages should be something you should be able to do to any phone, and chargers are meant to be universal.

But in order to be a good investor your personal preferences should NOT interfere with buying stocks.  While I don't own the phone, I don't dismiss many people around me use the phone. Or the fact that iTunes gift cards are a normal gift around the holidays without even asking me if I am an iPhone owner.  But these aren't the reasons why I decided to stake a claim in the value play a few years ago.  Many forgot back in 2016, Apple was trading under $100 dollars and there was fear they wouldn't be able to break into China and growth had stalled.  But as Apple continued to reinvent itself, I saw value in a company starting to pay a dividend, expanding internationally, and growing a profitable services and payments business. So when there is fear in the water you stake a calculated claim on an old dog that still has a few tricks.  Being in Risk Management, I had fun analyzing this stock and pulling the trigger when everyone was saying I got in too late. At an average of roughly $93 dollars, I was betting on a growing dividend, growth in China (maybe India), apps being the future (including iTunes), and logical determination that Apple phones would become larger as I knew people would share my frugal sensation over phone/tablets or phablets if you prefer (why have one of each when supersized phone does the trick).  I am not placing a big bet on Payments yet because I tend to know a little bit about this space. While people love the technology...I think there needs to be one wallet that can travel with you as you change from an ApplePay, SamsungPay, GooglePay....and merchants are CHEAP so it will be a very long time until every store and gas station pay for upgrade technology that supports these new types of payments.

Many say value is dead but I argue, you have to look in the right places. I just read an article about how Warren Buffet and Berkshire are enjoying the amazing gains of Apple. I laughed because I'm wondering if the pupil is finally learning from the teacher...looking back I bought Apple prior to when Berkshire made their purchase:

Post Mentioning Apple:
https://urbanomics.blogspot.com/2016/10/how-to-invest-in-clinton-trump-election.html 

Wall Street Journal: Buffet Bet Big on Apple


This has also happened with Teva Pharmaceuticals recently so I hope to keep the streak alive and maybe may a few future recommendations...one Oracle to another. :)

RADISYS - Still Room Before the Buyout

Radisys (NASDAQ:RSYS) -- This is a stock that I've followed and blogged about for many years and for FULL DISCLOSURE: I OWN SHARES OF RSYS

If ya don't know now ya know: Radisys is getting purchased by the largest cell phone provider in India, Reliance Jio.  

I quickly knew something was brewing because my portfolio was up sharply that day and my brother even called and asked if I had heard the good news.  While he was talking about RSYS, I was thinking about the fact that he had actually been listening and occasionally reading stocks I track and blog about.  Most investors LOVE an acquisition...and I'm no different.  Oddly, because I've owned RSYS for awhile I have a little HATER in me because I've bought in at higher prices in the past so I will have a loss on some older positions in my portfolio. 

Breaking Down the RadiSys Arbitrage

Arbitrage...I know technical trading language. So to keep things simple, playing the Arbitrage is like betting on whether the top college football player will get drafted with the 1st pick in the NFL draft.  We all know that it likely to happen BUT every now and then...it doesn't happen. 

RSYS is the like the top draft pick and they are being purchased for $1.72 in cash as stated in new releases and in the latest earnings conference call by the CEO.  The stock traded today at the $1.48 level EVEN THOUGH we all know they will be purchased (drafted with the top pick) for $1.72.  Buying the stock now is like getting in on a poorly kept secret -- "The Arbitrage".  But before I pull the trigger on a 16% gain, I have to weigh the risks (ughh sounds like I'm still working):

Geopolitical (Country) Risk: Believe it or not, I had to consider whether either company's government may get involved in nixing the deal. RSYS (American), Reliance Jio (Indian) - I think it's unlikely to get nixed but it should be considered as the proposed deal of NXP Semi & Qualcomm got the backhand from China likely due to their beef with the Trump Admin over tariffs (their deal never got approved).

Financial Risk: I see limited risk here, as it's a very small deal ($74M) and it's all CASH. Reliance being the largest cell provider in India seems to be able to easily close this deal.

Timing Risk: It was announced the deal will close in Q4 2018. It's August, so 1 quarter is not too lengthy in the corporate world for an acquisition.

Upsides: Another buyer could cause a bidding war but this scenario seems unlikely as no one else has come forward. Surprisingly, the latest earning report was very positive so you wonder if the deal could be sweetened.  It's unlikely as RSYS was a penny stock prior to the acquisition.

It's hard to call the last indicator Upside risk but I did want to point out that the CFO bought a large share of stock a few months back which was a very bullish sign.  It's what caused me to follow this stock closely over the last months but sadly I had analysis paralysis and didn't follow my gut which was telling me to load up after that recent indicator.  My final thoughts are this all cash deal will go through and a 16% spread is an opportunity for a moderate gain with limited risk.