Apple Inc. (AAPL): Comparing Ben Bernanke and Tim Cook

Apple Inc. (AAPL)U.S. stocks recorded another day of gains — that’s now seven up days over the past eight sessions — as the and the rose 0.25% and 0.14%. That pushed the S&P 500 up to another all-time high closing price.

Consistent with those gains, the , Wall Street’s fear gauge, rose today by 1%, to close at 13.71. (The VIX is calculated from S&P 500 option prices and reflects investor expectations for stock market volatility over the coming 30 days.)

As the Federal Reserve’s monetary policy meeting got under way today, technology stocks led the broad market — by a wide margin — as the S&P 500′s information technology sector increased 1.2%. (The runner-up, telecommunication services, managed only a 0.4% return.) Information technology was also the best-performing sector yesterday. The largest driver of those gains were shares of , which were up 2.9% today, for a 6.1% return on the week thus far. That two-day return has added $32.3 billion to the company’s market capitalization, enough to wrest the title of most valuable company in the world back from .

The catalyst for today’s price appreciation was the news that Apple Inc. (NASDAQ:AAPL) was setting another record with a jumbo $17 billion global bond issue. The proceeds of that bond will finance the company’s aggressive new capital return program that calls for a dividend increase and the largest share repurchase plan in history, at $60 billion. These initiatives were already announced a week ago during Apple Inc. (NASDAQ:AAPL)’s first-quarter earnings announcement, but actions speak louder than words in the marketplace. The demand for the bond, which hit $50 billion this afternoon, will also have contributed to the shares’ buoyant reaction.

In many cases, companies would be better off ignoring Wall Street’s siren song regarding financial engineering, but in Apple Inc. (NASDAQ:AAPL)’s case, issuing debt to buy back shares is a rational course of action that creates value for shareholders, both short- and long-term. Indeed, the cost of debt for blue-chip corporates is at historic lows (thanks, Mr. Bernanke!), and the shares appear undervalued. Furthermore, the resulting amount of leverage is negligible, and Apple Inc. (NASDAQ:AAPL) will still have plenty of cash to cover its operating needs. Those ingredients are the recipe for a successful capital return program; no wonder investors have sweetened to the shares.

The article The “Apple Effect”: Tim Cook Is More Powerful Than Ben Bernanke originally appeared on Fool.com.

Fool contributor Alex Dumortier, CFA, has no position in any stocks mentioned; you can follow him on LinkedIn. The Motley Fool recommends and owns shares of Apple.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!