President Donald Trump’s new tax plan could cause a tidal wave of internationally held cash to flood back into the US.
The repatriation tax holiday outlined in the plan, which officially passed into law on Wednesday, is designed to incentivize US-based companies that do big business overseas to bring those profits back home.
By Goldman Sachs’ calculation, S&P 500 companies hold $920 billion of untaxed overseas cash, and the firm estimates that $250 billion of that would be repatriated. Looking at all US-based companies, Citigroup says there’s a whopping $2.5 trillion of capital stashed internationally.
Once a company brings that money back to the US, it has a few options for how to use it. The first is reinvestment into core businesses – this is most likely the avenue policymakers would prefer, as it holds the most direct bearing on economic expansion.
Another option is for a company to repurchase its shares – this would be beneficial to stock prices and, by extension, the market as a whole. Buybacks are a good way to achieve immediate share appreciation and signal to investors that a stock is viewed as undervalued.
And regardless of how the cash is used, a tax break for multinational companies at least partially addresses what a recent World Economic Forum survey identified as the most problematic factor for doing business: tax rates.
So with that established, which companies stand to benefit most? Goldman says it's those holdings the most post-tax cash overseas relative to their market cap - a group heavily concentrated in the tech and healthcare sectors.
Back in late September, after the initial tax plan framework was released, the firm put together a handy list of the stocks that fit the bill. Here are the ones it has identified as the top 13 beneficiaries.
13. General Electric
Ticker: GE
Sector: Industrials
Total return year to date: -19%
Overseas cash: $35 billion
Overseas cash as % of market cap: 14%
12. Foot Locker
Ticker: FL
Sector: Consumer discretionary
Total return year to date: -52%
Overseas cash: $1 billion
Overseas cash as % of market cap: 15%
11. Citrix Systems
Ticker: CTXS
Sector: Tech
Total return year to date: 7%
Overseas cash: $2 billion
Overseas cash as % of market cap: 16%
10. Western Digital
Ticker: WDC
Sector: Tech
Total return year to date: 29%
Overseas cash: $5 billion
Overseas cash as % of market cap: 16%
9. Waters Corp.
Ticker: WAT
Sector: Healthcare
Total return year to date: 35%
Overseas cash: $3 billion
Overseas cash as % of market cap: 17%
8. Ralph Lauren
Ticker: RL
Sector: Consumer discretionary
Total return year to date: -1%
Overseas cash: $1 billion
Overseas cash as % of market cap: 20%
7. Microsoft
Ticker: MSFT
Sector: Tech
Total return year to date: 22%
Overseas cash: $128 billion
Overseas cash as % of market cap: 20%
6. Oracle
Ticker: ORCL
Sector: Tech
Total return year to date: 27%
Overseas cash: $48 billion
Overseas cash as % of market cap: 22%
5. Amgen
Ticker: AMGN
Sector: Healthcare
Total return year to date: 30%
Overseas cash: $36 billion
Overseas cash as % of market cap: 24%
4. Apple
Ticker: AAPL
Sector: Tech
Total return year to date: 33%
Overseas cash: $216 billion
Overseas cash as % of market cap: 25%
3. Qualcomm
Ticker: QCOM
Sector: Tech
Total return year to date: -18%
Overseas cash: $30 billion
Overseas cash as % of market cap: 35%
2. NetApp
Ticker: NTAP
Sector: Tech
Total return year to date: 22%
Overseas cash: $5 billion
Overseas cash as % of market cap: 36%
1. Cisco Systems
Ticker: CSCO
Sector: Tech
Total return year to date: 13%
Overseas cash: $68 billion
Overseas cash as % of market cap: 37%
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Here are the areas of the stock market that'll get the biggest boost from Trump's tax overhaul
