Carl Icahn: I'm Satisfied With Apple's Aggressive Buyback

Hedge fund guru Carl Icahn, whose fund owns about $4 billion in Apple stock, has been pushing for the company to boost its repurchase program for some time now. Initially suggesting Apple repurchase $150 billion in shares, his request has scaled back to $50 billion recently. But today he pulled his request after acknowledging that Apple is basically already on pace to repurchase shares close to this magnitude within the year anyway.

On track for a massive buyback
According to the proxy advisory firm Institutional Shareholder Services, or ISS, Apple is on pace to repurchase at least $32 billion in shares in fiscal 2014. ISS argued in a request that Apple shareholders vote against Icahn's proposal for a larger buyback that $32 billion is just $18 billion short of Icahn's proposal. Icahn says he agrees with ISS and has pulled his proposal.

Though it's interesting to see Icahn back down, it shouldn't be a big surprise to investors. Icahn had recently praised Apple for its $14 billion spending on repurchases in a two-week period following an 8% sell-off to shares after the company announced its first-quarter results. Apple CEO Tim Cook called the purchase "opportunistic" and "aggressive" in a WSJinterview.

To announce to his decision to withdraw his proposal, Icahn unveiled another letter at his website launched last year called Shareholders' Square Table. The letter's sentiment suggested Icahn was satisfied with Apple's aggressiveness:

While we are disappointed that last night ISS recommended against our proposal, we do not altogether disagree with their assessment and recommendation in light of recent actions taken by the company to aggressively repurchase shares in the market.

Reflecting on Apple's valuation
Of course Icahn couldn't help but to reflect on Apple's valuation again in his most recent letter, saying that Apple "continues to be extremely undervalued." Even at $550 per share, Icahn was calling Apple a "no brainer."

While investors should certainly do there own due diligence, some of Icahn's recent investments bode well for his track record at finding undervalued stock picks. In his open letter to Tim Cook in January, Icahn cited a slew of recent picks he bet big on because they were undervalued, including Netflix, Forest Labs, and Herbalife -- all up more than 50% in the past twelve months.

Of course it doesn't take expert analysis to realize Apple is cheap relative to its underlying fundamentals. Despite the fact that Apple is clearly a cash cow, it trades at just 13 times earnings compared to the S&P 500 at about 17 times earnings. Given the company's conservative valuation, Apple's recent aggressive repurchases are good news. Investors, like Icahn, should be incrementally more confident in the underlying value of Apple shares with Apple being more opportunistic in its buyback program.

Don't underestimate the power of a handful of solid dividend stocks
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks as a group handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks in particular are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.

The article Carl Icahn: I'm Satisfied With Apple's Aggressive Buyback originally appeared on

Daniel Sparks owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story