Is Apple's Secret Hedge Fund Prepping For A Dividend Boost?

Feb. 6.13 | About: Apple Inc. (AAPL)

By: Jake Mann

The subject of Apple (NASDAQ:AAPL)'s so-called "secret" hedge fund has gained quite a bit of steam in recent months. At Insider Monkey, we originally covered how Braeburn Capital, an asset manager in Nevada, was managing Apple's cash hoard at the end of its 2012 fiscal year.

Shortly thereafter, we expanded this analysis to Seeking Alpha, and discussed issues like asset allocation, yearly growth rates, and how much cash the company actually had on hand for a dividend boost. For those needing a refresher course, we encourage you to check out our previous two analyses of Apple's enormous cash position.

This time around, we're going to update this data to include Cupertino's latest 10-Q for its FY2013 first quarter. Gaining a better understanding of how Apple's investable cash is positioned will not allow us to foretell the future, but it is an important indicator to track.

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.

Without further ado, let's take a look at the latest quarterly changes in Apple's cash hoard.




Q1 FY2013

Q4 FY2012

Pct. Change (q/q)





Money market funds




Mutual funds




U.S. Treasury securities




U.S. agency securities




Non-U.S. government securities




CD and time deposits




Commercial paper




Corporate securities




Municipal securities




Mortgage and asset-backed securities




Total assets invested (including cash)




Click to enlarge

*Data via Apple's latest 10-Q here, and 10-K here.

**In billions, rounded to the nearest hundred million.

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 Benjamins. 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. Outlays to lower liquidity assets, like U.S. agency securities, CD and time deposits, non-U.S. government securities, corporate securities, and Municipal securities were all underserved.

What does this mean for investors?

Well, in short, there's no way to know for sure. The inordinately large allocation of this past quarter's cash to highly liquid asset classes indicates that investors may see more value-creation on the horizon. We can only speculate if this effort would come in the form of a larger share buyback program or a dividend boost, but the figures discussed above look promising.

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.

Disclosure: I am long AAPL.

Business relationship disclosure: This article is written by Insider Monkey's writer, Jake Mann, and edited by Meena Krishnamsetty. They don't have any business relationships with any of the companies mentioned in this article and they didn't receive compensation (other than from Insider Monkey and Seeking Alpha) to write this article.