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| Reader Survey |  |
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What is likely to provide Apple shareholders the highest risk-adjusted rate of return on the company's excess cash balances?
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Common stock dividends, including a one-time or a series of special dividends |
44.97%
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Share repurchases |
32.18%
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Acquisitions |
9.22%
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Current capital-investment policy |
8.39%
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Issuance of preferred stock, as proposed by hedge fund manager David Einhorn |
5.24%
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Poll analysis: The $137 billion in cash that Apple has sitting on its balance sheet exceeds the entire market values of technology peers Cisco Systems and Intel, prompting investors to consider anew how Apple should invest this stockpile or otherwise return it to shareholders. Nearly 45% of 946 respondents to this week's poll think Apple shareholders would be best served if the company returned at least a portion of its excess cash to its shareholders by way of either an increased dividend or special dividends, while just over 32% of respondents believe share repurchases would offer stockholders the best risk-adjusted return. Acquisitions are widely viewed as a less attractive option, with support from just 9% of respondents. And despite the tremendous value delivered to shareholders over the past decade, only 8% of NewsBrief readers think Apple's current capital-investment policy offers the best return prospects. Hedge fund manager David Einhorn shares this view, which explains the reason he recently proposed that Apple issue a "perpetual preferred" stock. Only 5% of respondents think this proposal is the best course of action for Apple. With cash representing about 31% of its market capitalization, Einhorn thinks Apple shares are being penalized by the market and that the issuance of preferred shares would help to unlock considerable value in the common stock. Critics of this strategy, including Aswath Damodaran, see Einhorn's plan as financial engineering rather than value creation. Apple has said that its management "has been in active discussions about returning cash to shareholders." Overlooked by many is the fact that $94.2 billion of Apple's cash balance is held by its foreign subsidiaries and, absent a change in tax law, repatriating it to pay for dividends or share repurchases would incur taxes. In March of 2012, Apple announced that it would start paying out $45 billion to shareholders over three years via dividends and buybacks. It seems most likely that Apple will accelerate or expand this plan. -- David T. Larrabee, CFA, Director, Member and Corporate Products, CFA Institute
    
| Market Activity | |
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- Italy's cost of borrowing climbs
With a general election weeks away, Italy's cost of borrowing is rising. The Treasury sold €3.45 billion worth of notes maturing in 2015 at 2.3%, well above 1.85% in January. Bloomberg
(13 Feb.), Reuters
(13 Feb.)
| Economics | |
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- Japan is stuck in recession as GDP continues to fall
Japan's economy contracted in the fourth quarter, marking the third quarterly decline in a row and leaving the nation in recession, according to the Cabinet Office. Gross domestic product dropped an annualized 0.4%, the government said. The data come as Prime Minister Shinzo Abe pushes for increased stimulus to end deflation. Bloomberg
(14 Feb.), Reuters
(14 Feb.), NHK World (Japan)
(14 Feb.)
- Foreclosure filings decline 28% in U.S.
U.S. residential foreclosure filings decreased 28% last month compared with January 2012, according to RealtyTrac. The number of filings, 150,864, was the smallest since April 2007. California legislation slowing first-time default was a big factor, RealtyTrac says. Bloomberg
(14 Feb.)
- China makes headway in turning yuan into global currency
China's careful but determined effort to make the yuan an important currency in global trade is delivering results, giving the yuan an increasingly bright future, according to The Economist. "China's currency has resumed its stately appreciation against the dollar, climbing by 2.5% since its July trough," the magazine notes. "Hong Kong's yuan deposits have grown steadily since September (although they have yet to regain their 2011 peak) and the [offshore yuan] is once again trading at a premium to its onshore cousin." The Economist (tiered subscription model)
(09 Feb.)
- Advisers must pay attention to affluent clients' collections
Financial advisers should give close attention to wealthy clients' collections and make sure items are inventoried, valued and insured, experts say. A Northern Trust survey found that 20% of Americans with more than $1 million available to invest have acquired collections worth enough to be considered investments. Reuters
(13 Feb.)
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27 March 2013
New York City, New York, United States
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Lean more and register for the event. |
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| Geopolitical/Regulatory | |
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- Fearing currency war, G-7 affirms market orientation
Responding to Japanese policy apparently targeting a certain rate of inflation, the Group of Seven says it remains committed to market determination of currency value, in a bid to avert a currency war. Fiscal and monetary policies "have been and will remain oriented toward meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates," G-7 finance ministers and central bank governors said. The Wall Street Journal
(12 Feb.)
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