How could professional analysts have gotten it so wrong?

Apple’s stock that is. The Times is on it! They have interviewed experts. They found a professor or two. It’s a lotta things! It’s complicated! Some say one thing, and some say a modification of this one thing. Get your tootsie-frootsie ice-ah cream!

Fortunately, I am here to uh-splain it all for you. Here is what happened. Gather round. There was once a young man named Fredrich Maynard Krugman. He got an undergraduate degree in history with a minor in sociology, and then he got into Wharton or some shit. In pursuit of his MBA, he took a couple of finance courses. The first one taught him how to value bonds and equities, and the second one taught him how to figure out firm valuations based on the partial capital structure information in the word problems at the end of the chapter. Also, he took a statistics class; it didn’t really stick, but he does vaguely recall what an adjusted R-squared means, and Professor N. Viswanathan was nice enough to show everyone that you could just use the Slope function in Excel when you didn’t want all that ANOVA bullshit that you don’t understand anyway.

So he graduates. Now, he doesn’t have a background in applied math or anything, so he gets a job as what the New York Times calls “a professional analyst.” And after a couple of weeks on the job, his boss comes over, and he’s like, “What the fuck is this?” It’s Fred’s analysis of Apple’s stock, and it says, with charming earnestness, that the stock is overvalued at one gatrizillion kroner per share.

Fred explains that he just took Apple’s recent Earnings Per Share divided by a growth rate derived from the firm’s capital structure model and both its own historic stock beta as well as the historic betas of similar firms and competitors, and then he added the Net Present Value of Future Growth Opportunities, which he carefully figured after diligently calling some industry insiders plus an old frat bro of his who actually works in product development at Apple—nothing untoward, just to get a feel for what might be in the pipeline . . . and at this point, his boss is like, “What the fuck are you talking about?”

Fred says that Apple has followed the classic tech company trajectory; it’s still a big valuable firm, but it’s getting awfully blue-chippy, producing popular products for a pretty mature market, unlikely at this point to get much bigger or grow much faster . . . I mean, how much bigger could it possibly get?

Fred’s boss is like, “What the fuck are you talking about?”

He then explains that the job of analysts is to predict that popular firms are worth tons of money until such time as that analysis proves wrong. So you can put away your little NPVGO model, you fucking nerd. No one can predict the market anyway. Don’t you know anything? Just follow the momentum. What’s the trend? Who cares what the company is doing? Just mention something about the earnings report. What are you doing playing with all that SAS shit, anyway? What are you, some kind of engineer? Pick better fonts. Get invited on Bloomberg. And for fuck’s sake, is that Jos. A. Bank? Christ.