Apple Is Getting Comfy With Its Cash

Jul.26.11 | About: Apple Inc. (AAPL)

On January 4, 2009, in the depths of the market crisis, I postulated Apple (NASDAQ:AAPL) would build its cash exponentially. I dubbed the remarkable phenomenon "Rosenman's Law". Without a doubt, no one has to tell Apple to obey the "law." The company has accumulated cash at an accelerating rate, confirming the canon. Each quarter, Apple adds heaps of dough onto its balance sheet, even surpassing the trend line I drew three years ago. The massive position in cash, and short and long term investments is breath-taking and, by no means, done (click on image to enlarge).
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When this trend all started, Apple held mainly cash and short term assets. No longer. Apple has been buying longer term investments, that is, assets maturing in over a year. In 2006, Apple stored only $0.9 billion in long term securities. Since then, it's piled money into longer term investments. This quarter, $47.8 billion held in securities of durations over a year. Sixty three per cent of Apple's cash is now long. For those worried about Apple holding primarily long U.S. debt, don't be. The company is gaga into corporates with $23 billion long and $7 billion short (could there be a little Microsoft hidden in there?).

What is the reason behind the trend? Is Apple becoming a hoarder? No, Apple is simply getting comfy with its cash. It's extending the maturities of its holdings to gain some basis points of interest. Apple doesn't seem perturbed by the crisis over the debt ceiling. Moreover, going "long" signals that Apple isn't ready to part with the green stuff, whether for acquisitions, buy backs, or dividends. Apple, it's socking the money away, to be used only on a very very rainy day. For the foreseeable future, "Rosenman's Law" stands: The bank of Apple will need a bigger vault.

Disclosure: I am long AAPL.