What happened last week:
Despite a 16% fall in the sales of iPads and flat revenue, Apple managed to beat analyst expectations by a substantial margin for the first quarter of 2014 (those “in the know” were expecting earnings of $10.08 per share – Apple came in at $11.62 – take that difference and multiply it by the hundreds of millions of shares in issue to get an idea of the scale).
Apple also announced a $30 billion increase in its share buyback plan and a 7-for-1 stock split. The share price went from the $520 mark up to $571 by close of trading on Friday.
The stock split is one of those phenomena that has no real impact on the underlying value of the company – but tends to increase it anyway. You see, at $571 per share, it’s just not so easy for the general public to spend their spare $100 on Apple. But if you take every share at $571, and turn it into 7 shares at $82 a piece, you’ve just expanded the potential purchase base. At the same time, it permits entry of Apple into the Dow Jones (the classing of 30 “big” shares on US stock exchanges).
Again, this seems like a strange thing for Apple to want. Being classed as one of 30 big shares seems like a random award. On the other hand, there are plenty of funds that track themselves against the Dow Jones – inclusion on the index is a bit like guaranteeing regular investment.
So it’s really not so surprising that the share price did a sharp upturn.
Japan’s Government Pension Investment Fund manages a portfolio worth $1.26 trillion. If it were an economy, the Government Pension Investment Fund would be the 14th largest in the world.
So when Shinzo Abe orchestrates a reshuffling of its Investment Committee, and replaces all by two of the old members with more aggressive risk-takers*, the investing world pays attention.
*at least, in Japanese terms.
The GIPF is due to set new investment allocations in the coming months. Last year, three of the new 8-member investment committee were involved in shifting the investment policy of the fund away from domestic bonds and toward the equity market. Should be interesting.
Incidentally, Japan’s Health Minister is responsible for appointing the investment committee. The, um, health minister?