On the other hand, if companies were to utilize their flush war chests to acquire software companies, as the Evercore ISI analysts suggest, investors may potentially capture the upside of the greater M&A activity through broad software sector ETFs, including the iShares North American Tech-Software ETF (NYSEArca: IGV), SPDR S&P Software & Services ETF (NYSEArca: XSW) and PowerShares Dynamic Software Portfolio (NYSEArca: PSJ).
The software ETFs lean toward smaller potential takeover targets. For instance, IGV includes 10.4% small-caps and 39.6% mid-caps. XSW includes 21.9% micro-caps, 33.4% small-caps and 30.7% mid-caps. PSJ holds 11.1% micro-caps, 30.1% small-caps and 34.0% mid-caps.
A repatriation bill would most likely either included a new adjusted low tax rate on foreign revenue earned by a U.S. corporation or even a one time tax break. U.S. companies with foreign revenue streams are typically taxed in the local host country and then again once the money is brought back into the U.S. The companies won’t have to experience a double taxation since a foreign tax credit is provided, but firms can opt to defer repatriation, which has caused many multi-nationals to sit on billions of dollars in overseas accounts.
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Max Chen contributed to this article.