According to Dictionary.com – Repatriation is: the sending of money back to one’s own country.
E.g. “the repatriation of profits by foreign investors”
In USA, there’s a 35% tax on money made abroad returning to the US. For this reason, international companies that have made billions of dollars overseas don’t want to bring their cash back to the US. In the year 2004, the US Government provided a small window for companies to bring their cash back from abroad at a tax rate of 5.25%. 2004 was also the last time repatriation was allowed.
Why does this matter to the average investor?
Because with Trump now in the driver’s seat, he may, just may, convince Congress that repatriation is the right move for America as this is one of his major tasks on his agenda to ‘make America great again’. To the average investor, this could be spell a buying opportunity. But with so many American multinational corporations making money abroad, which of these companies should we look at?
My answer is a logical one – look at the ones who have made the most money internationally.
Companies like APPL (Apple), IBM, MSFT (Microsoft), and PFE (Pfizer) are among the heavyweights that have been doing business internationally for decades. The logic is that this ‘tax holiday’ would represent an opportunity for them to bring billions upon billions of dollars back home. When companies have cash, they have choices! This injection of cash could enable companies to do the following:
- Mergers & Acquistions (M&A)
- Boost share price by performing Common Share buybacks
- Boost Research and development
- Business expansion by creating new jobs
- Pay off debt to create a stronger balance sheet
Or the other 147 different things to better their companies. Another big strategic move they may do is put their capital into investments through banks, which could very easily benefit the likes of Citibank, Goldman Sachs, Bank of America, Wells Fargo as well as others…. so watch out for those as well.
If Trump’s repatriation is a go, multinational corporations longing to bring money back home could very well make the nation stronger and your wallets fatter at the same time.