{"id":6524,"date":"2016-12-07T22:32:41","date_gmt":"2016-12-07T22:32:41","guid":{"rendered":"https:\/\/fundamentalis.com\/?p=6524"},"modified":"2016-12-07T22:32:41","modified_gmt":"2016-12-07T22:32:41","slug":"cash-repatriation-for-share-repurchases-in-2017-first-take","status":"publish","type":"post","link":"https:\/\/fundamentalis.com\/?p=6524","title":{"rendered":"Cash Repatriation for Share Repurchases in 2017 &#8211; First Take"},"content":{"rendered":"<p>Yesterday, 12\/6\/16, at the CFA Chicago luncheon, Dan Clifton of Strategas Partners gave a great presentation on the coming fiscal stimulus and what it might look like and what it might mean for the US economy in 2017.<\/p>\n<p>The inevitable question about cash repatriation came up and Dan gave a lengthy and thoughtful response, but he eventually got down to the numbers: Dan thought that as much as $1 trillion could be brought back to the US as repatriated cash, and granted investors will hear the standard hue-and-cry about using the repatriated cash to repurchase stock, Clifton thought that $300 &#8211; $400 billion of the repatriated cash could be spent directly on buybacks.<\/p>\n<p>Looking at the numbers:<\/p>\n<ul>\n<li>The current market cap of the SP 500 is roughly $19 trillion, so roughly 5% of the SP 500 market cap could be repatriated;<\/li>\n<li>In terms of the &#8220;index divisor&#8221; (per Thomson Reuters data) there are 8.6386 billion shares used in the SP 500 EPS calculation.<\/li>\n<li>Using Clifton&#8217;s numbers, if $300 &#8211; $400 billion of the $1 trillion is used directly on shares repurchases, then roughly 1.5%, 2%, 2.5% of the SP 500&#8217;s market cap could be repurchased JUST from overseas cash repatriation in 2017.<\/li>\n<\/ul>\n<p>This obviously doesn&#8217;t include any cash generated from a reduction in effective tax rates, faster revenue growth or cash generated normally from operations, resulting in free-cash-flow.<\/p>\n<p>Given current Thomson Reuters estimates, the SP 500 is already expecting 12% EPS growth in 2017, so investors could be looking at a 10% increase in that number to 13% &#8211; 15% again just from the cash repatriation, and this assumes no handcuff&#8217;s are put on repatriated funds.<\/p>\n<p>The one person I talked to about this thought it was very bullish, and that it wasn&#8217;t in the market yet.<\/p>\n<p>In year-end meetings with clients, i&#8217;m telling clients from both sides of the aisle that the SP 500 could be up 20% next year. Prior to the election and since last Spring &#8217;16, the SP 500 was already looking at its best year of expected earnings growth in 5 years. The proposed President-elect and Congressional fiscal policy could be another level of earnings growth above what was already built into the numbers, before November 8th.<\/p>\n<p>Personally, the $1 trillion repatriation estimate that Dan Clifton threw out seemed on the lighter side to me. Apple alone has $250 billion sitting on its own balance sheet, which is 1\/4 of the expected total.<\/p>\n<p>The more info I get on the topic and to the extent I can provide more color, it will be discussed here.<\/p>\n<p>Simply throwing this out &#8211; thanks for reading.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Yesterday, 12\/6\/16, at the CFA Chicago luncheon, Dan Clifton of Strategas Partners gave a great presentation on the coming fiscal&hellip;<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[184,185,183],"tags":[],"class_list":["post-6524","post","type-post","status-publish","format-standard","hentry","category-184","category-2017-fiscal-policy","category-repurchase-stock"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"post_mailing_queue_ids":[],"_links":{"self":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6524","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=6524"}],"version-history":[{"count":4,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6524\/revisions"}],"predecessor-version":[{"id":6528,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=\/wp\/v2\/posts\/6524\/revisions\/6528"}],"wp:attachment":[{"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=6524"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=6524"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/fundamentalis.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=6524"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}