Canadian pension fund manager Caisse de dépôt et placement du Québec has significantly raised its bet on Apple Inc., holding a stake in the California technology giant worth more than $1-billion as it hunts for fewer but more quality investments in the years ahead.
Documents filed with the U.S. Securities and Exchange Commission show the Montreal-based pension fund doubled its position in Apple in its latest quarter ended Dec.31, to two million shares from one million shares three months earlier.
The value of that stock at the end of the year was $1.07-billion, placing Apple among the Caisse’s largest U.S.-traded investments. Only its stakes in Enbridge Inc. and CGI Group Inc. are larger.
Shares in the iPhone and iPad maker have sunk steadily since hitting a 52-week high of $705.07 on Sept.21 to $448.97 on Tuesday on the Nasdaq. It wasn’t clear at what price the Caisse increased its position.
Caisse chief executive Michael Sabia is steering a new path for the pension fund that will see it trim its activity in traditional index investing by focusing instead on fewer assets it understands more deeply. Chief investment officer Roland Lescure has said he’s looking for companies with strong management, predictable returns and decent liquidity levels.
Apple, the world’s most valuable company by market capitalization, has accumulated US$137.1-billion in cash over the past five years as sales growth soared. The liquidity is so high that it has become the subject of an organized effort by its investors to return the money to them.
Are they hoping for a split? Oracle Investments says it is coming.
The solution to Apple Inc.’s recent share price woes is a 10-for-1 stock split, says Laurence Balter, chief market strategist at Oracle Investment Research.
“Mathematically it does nothing except make for a low price,” he said in a note to clients this week.
“Valuation-wise it’s neutral. Financially, it saves the company from having to dole out billions it needs to fend off its competition from ever getting a stranglehold. More importantly however, psychologically it’s everything.”
Mr. Balter said institutional investors continue to buy Apple shares based on cheap price/earnings multiples, but retail investors not so much.
“The problem is that the average American retail investor doesn’t buy P/E ratios. They buy (or sell) share price action,” he wrote.
Mr. Balter believes the average retail shareholder will be attracted to a reachable and cheaper share price, adding that downside to a stock split is negligible and fully reversible if it doesn’t work out.
“Apple can continue to increase its dividends at a comfortable rate and buybacks can continue at the board’s discretion,” he wrote.
So rather than pay out more of its US$137-billion cash pile as hedge fund manager David Einhorn and others are proposing, a stock split wouldn’t cost Apple anything.