By Zach Scheidt
This post Revealed: The iPhone X… And How To Pay For It appeared first on Daily Reckoning.
Yesterday, Tim Cook — CEO of Apple Inc. (NASDAQ:AAPL) — took the stage at the new Steve Jobs Theater in Cupertino, California for the company’s annual new product launch.
No doubt, you’ve seen headlines from this event, including details on “Apple Park” — Apple’s campus which will be 100% powered by renewable energy and feature as many as 9,000 trees.
The company also unveiled its iPhone 8, iPhone 8 Plus and iPhone X, along with a new Apple Watch and 4K Apple TV.1
These are the types of announcements that drive short-term movements in Apple’s stock. Conventional investors get giddy about a shiny new product that looks exciting… Or they express disappointment if the announcement doesn’t live up to expectations.
But from my perspective, Apple’s event this week was just a sideshow. The real excitement for savvy AAPL investors has been on the books for quite some time now. And regardless of how investors react to Apple’s announcements this week, our cold hard reason for investing in this iconic company will remain.
Let me explain…
Apple’s Cash Is the Company’s Best Feature
Apple is currently sitting on a massive cash balance.
According to the company’s most recent quarterly report, Apple has $261.5 billion in cash.2 That’s up 13% over last year’s cash balance, and this cash hoard should continue to grow as the company generates profits quarter after quarter.
To put this number into perspective, Apple could buy the entire companies of Hewlett Packard and AT&T, and still have about $10 billion left over for “chump change.”
It is this giant pile of cash that investors are counting on to fund future dividends and share buybacks. And those dividends and buybacks are much more likely to drive long-term gains for investors than any new product that Apple announces this week.
So while the new Apple watch or 4K TV experiences are great for consumers, I’m much more interested to see how Apple will use its cash balance to boost your wealth.
$246 Billion in Cash Held Hostage
One of the biggest challenges for Apple (and for us as investors) is the fact that so much of Apple’s cash is held overseas.
Of the company’s $261.5 billion in cash, approximately 94% of that total is held in bank accounts outside of the United States. This cash comes from profits that Apple generated when selling its products and services to international customers.
The problem is that Apple can’t “repatriate” that cash (or bring that cash back to the United States), without paying tax on these balances.
Now to be clear, Apple has already paid income tax on these profits. But the tax has been paid to the various countries in which Apple generated the profits. So if Apple sold iPhones or watches in Germany, South America or China, the company has already paid taxes to those countries.
It seems preposterous that the United States would have a claim on these profits when none of them were generated in the …read more
Source:: Daily Reckoning feed
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