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CLICK HERE to access associated slides.
Topics discussed on the call:
- Comparison of Major provisions
- Potential major change in the expensing of R&D costs
- Top down view with relation to all tech companies
- Categorical winners and losers
- Impacts to Hedgeye Tech Sector LONG/SHORT tickers
Tiers of companies seeing positive/negative impacts:
There are at least 4 tiers of companies for whom this nets positive impact:
Tier 1 = Companies who are fast innovators, generally tight on cash, and any extra access to cash helps keep the flywheel in play
Tier 2 = Companies that are mature, have tons of excess cash, don't really know what to do with it, have a buyback – this will drop into the buyback bucket
Tier 3 = Companies who do not have (enough) growth and need help in that category, cue M&A!
Tier 4 = Companies who are debt heavy and need cash, this is an important lifeline.
There are at least 3 tiers of negative impact:
Tier 1 = Companies who looked like a great acquisition target because they are foreign domiciled and hence an efficient use of cash for a US company with lots of stranded cash (Ahem…NXP)
Tier 2 = Companies who compete head to head with US companies who had been constrained by higher tax rates and (maybe) lower re-investment opportunities
Tier 3 = Companies who have good business but have been using debt to shield taxes à Les Jeux Sont Fait (translation = “the game is up”)
