Aug

29

Apple, from Rocky Humbert

August 29, 2013 |

 It is rumored that today AAPL placed their 10 year paper at 10yrTbond+75bps, which means about a 2.4% rate, if I'm reading the screen correctly. Given that the yield on AAPL's equity is about 2.9%, that's a nice positive cash flow way to conduct a buyback and still keep your overseas cash hoard protected from taxation. Not that it matters (or has any magical power), but for the equity to get to a 2.4% yield, with a divvie payout of $12.20, it would need to hit about $508.

Not to jinx it, but I will point out that AAPL recently peaked at 513.74.

Victor Niederhoffer writes:

One should take account of the fact that for many purposes empiriclaly and theoreticlal, especially in a world without taxation the value of debt + equity is a consant. So if debt goes up by 1 billion the market value of common stock goes down by 1 billion. The modigliani miller theorem.

Rocky Humbert:

I don't think many CFO's believe M&M is actually true in the real world. Those who do have seen their companies go bankrupt. Like many investors, I have preferences, and I'll generally put a higher valuation on the equity of a company with lower leverage even if the ROE is lower. I'm sure activist investors will disagree with my bias. M&M doesn't take correct account of risk adjusted ROE I believe. And it's hard to test my bias quantitatitively since in the long term, the overleveraged guys who went to B-school all blow up. Survivor bias etc.


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