Why Tax Repatriation Matters
Washington lawmakers are considering changes to the tax code that could result in a large amount of cash returning to the U.S. According to Goldman Sachs, nearly $1 trillion could be eligible for repatriation, allowing U.S.-based companies to deploy more money in even more productive ways at home. Why does this matter and where should investors look for investment opportunities?

  • ​Investors should consider that 85% of untaxed foreign money is held by Information Technology and Health Care companies.

  • U.S. companies may be able to repatriate their post-tax funds at any time at no additional cost if a tax affects all untaxed overseas cash, regardless of when companies choose to repatriate funds.

  • In the absence of a time restriction, companies may strategically spend repatriated funds. During the last 12 months, S&P 500 companies with taxable overseas cash spent 58% of their cash outlays investing for growth (capex, research and development, mergers and acquisitions) and 42% returning cash to shareholders (share repurchases, dividends).1

  • Any manner in which repatriating companies spend their cash is likely to fuel earnings growth, which may lead to equity gains for Information Technology and Health Care businesses.

1 Goldman Sachs (2017) “Overseas Cash Repatriation Would Boost Shareholder Returns and Growth Investments.” US Equity Views.

The views expressed are the views of Fred Alger Management, Inc. as of October 2017. These views are subject to change at any time and they do not guarantee the future performance of the markets, any security or any funds managed by Fred Alger Management, Inc. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.

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