3. Hedging out Apple’s cash isn’t easy. The company can make it simple by putting its cash in something like the SPDR S&P 500 ETF Trust (NYSEARCA:SPY), making it ridiculously easy for investors who want a pure-play on the electronics business to hedge out the effects of the company’s investment performance. For each dollar long Apple Inc. (NASDAQ:AAPL), investors will merely have to go short about $0.33 of the S&P 500 through readily available ETF proxies.
Apple’s not alone in interesting uses of its retained earnings or investment pile. Ford Motor Company (NYSE:F) keeps its pension funds in predominately fixed-income investors to serve as a counter to a very cyclical underlying business. But Apple Inc. (NASDAQ:AAPL) isn’t a very cyclical business, and it doesn’t have years upon years of liabilities to pay out. Rather, its a growing electronic’s business holding back its valuation due to capital allocation.
Investors should call for Apple Inc. (NASDAQ:AAPL) to simplify its holdings, at a minimum. Moving the company’s building stockpile of cash – one which could grow to $170 billion by the end of the year – makes perfect sense. There’s no other way to boost the expected return for investors without paying taxes. Investors want a dividend to presumably reinvest in equities. Those who don’t want the exposure can simply short it out.
The article Apple’s Capital Allocation Miss originally appeared on Fool.com and is written by Jordan Wathen.
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