Is Apple preparing for a big increase in its share buy back?

2 mins. to read
We have mused in recent weeks that Apple could surprise the market with a large dividend increase or share buy back. Well, maybe we are barking up the wrong tree here but the movement in its liquid securities as we relay below could be a clue as to what is to come…
According to its latest filing with the SEC, Apple now holds $136.2 billion in cash, cash equivalents and marketable securities, up from the $120 billion or so it maintained at the end of the previous quarter. Business Insider projects that Apple is on track to finish FY2015 with $300 billion in investable cash, which breaks down to an estimated growth of about $15 billion per quarter-right on track with the actual growth we’ve been seeing.

Let’s take a look at the latest quarterly changes in Apple’s cash hoard.

Q1 FY2013 Q4 FY2012 Pct. Change (q/q)
Cash $7.1 $3.1 129.0%
Money market funds 3.7 1.5 146.7%
Mutual funds 3.7 2.4 54.2%
U.S. Treasury securities 22.9 20.1 13.9%
U.S. agency securities 20.6 19.5 5.6%
Non-U.S. government securities 4.7 5.5 -14.5%
CD and time deposits 2.3 2.2 4.5%
Commercial paper 2.1 2.1
Corporate securities 49.4 46.3 6.7%
Municipal securities 6.1 5.6 8.9%
Mortgage and asset-backed securities 13.7 11.9 15.1%
Total assets invested (including cash) $136.2 $120.2 13.3%


The immediate takeaway from these numbers is the abnormal change in Apple’s pure cash position. In its typical asset allocation over the past three years, Apple has held roughly $1.5 billion to $3 billion in cash. The company now holds more than $7.1 billion in effective cash. Moreover, Apple also holds a significantly larger chunk of its investable cash in money market and mutual funds, about $7.4 billion combined. This total is also far above the company’s three-year average of $3.3 billion.

In fact, when we measure the size of Apple’s holdings in these highly liquid asset classes, we can see that their size has now eclipsed $14 billion, more than twice that of what should be considered “normal,” at least in recent years.

It’s helpful to think of this major shift another way. Consider the fact that Apple’s total cash hoard increased by $16 billion last quarter. Of this inflow, nearly half of it was allocated to cash, money market, and mutual funds. The inordinately large allocation of this past quarter’s cash to highly liquid asset classes indicates that perhaps Cook is about to either (a) make an acquisition or ramp up its share buy back program.

Of course, a strategic acquisition shouldn’t be ruled out either, but with optimism on Wall Street that income seeking investors will receive a higher payout by the end of 2013, it’s hard to ignore the telltale signs in Apple’s latest 10-Q.

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