Apple Is Dirt Cheap, While Berkshire Cleans Up

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

As the following graph shows, today's markets are not behaving as one might have expected on day one of the government shutdown. Stocks indexes are up -- the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average have gained 0.5% and 0.14%, respectively, as of 3:20 p.m. EDT -- while gold and volatility are falling.

This morning, billionaire investor Carl Icahn updated the Twittersphere on his campaign at Apple with the following tweet:

Readers of this column will know that Icahn had publicly endorsed the notion of a $150 billion buyback on Sept. 11, when he made the case for Apple shares being "extremely cheap."

However, it was the turn for another legendary investor [some might say "notorious"] to make the same case today. Appearing on CNBC, Legg Mason's Bill Miller said:

The biggest no-brainer in the history of the earth -- that's what Apple is to me right now. It just makes no sense for Apple to trade where it is: Seven times enterprise value to free cash flow. 14%, in essence, free cash flow yield on enterprise value. 10% simple free cash flow yield. If Apple was a junk bond, it would trade 40% higher -- junk yields are 6 [percent]. Junk bonds are a contract, they have a claim, but they have a claim on, typically, a bad balance sheet.

Someone is listening; Apple's stock is outperforming the broad market today, with a 1.9% gain late in trading.

According to the amended terms of the warrant agreement Berkshire Hathaway struck with new Dow component Goldman Sachs , the conglomerate will now own approximately 13.1 million shares of the investment bank. The precise number of shares is based on the average closing price of Goldman shares during the 10 trading days up to Oct. 1. That figure -- equivalent to a 2.8% ownership stake worth roughly $2.1 billion -- immediately vaults Berkshire to the rank of sixth-largest shareholder, based on the public ownership data from S&P Capital IQ for the end of June.

Not bad, considering Berkshire didn't spend a penny out of pocket for those shares, which were a sweetener on top of the 10% dividend it received on the Goldman preferred shares it invested in at the height of the credit crisis.

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Fool contributor Alex Dumortier, CFA has no position in any stocks mentioned. The Motley Fool recommends Apple, Berkshire Hathaway, and Goldman Sachs. The Motley Fool owns shares of Apple and Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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