Large American Companies Amassing Cash, Hesitant to Spend

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(Written by Alexander Crawford. Free operating cash flow/revenue data sourced from Screener.co, all other data sourced from Finviz.)

Many of the largest US companies are “richer than ever,” according to a report from Moody’s. Of the 1,600 companies rated by Moody’s, there was an 11.2% increase in cash held year-over-year. But the real question is: Why aren’t companies spending?

Google demonstrated their wealth earlier this week, with their bold plan to buy Motorola for $12.5 billion cash -- a large sum, but only a fraction of their $35 billion-plus cash reserve. Unfortunately this scale of investment has become rare.

"The bottom line is that a large number of very successful U.S. companies are on a wait-and-see mode with the U.S. economy in particular," Dartmouth Business Professor Anant Sundaram told NPR.

At the end of 2010, Apple (AAPL), Microsoft (MSFT), and Cisco (CSCO) had each amassed over $40 billion cash. Why are companies sitting on this cash?

With interest rates so low, it is very cheap to borrow money and hold off paying down debts. But companies are also simply resistant to investment and re-hiring, because the US economy isn’t growing enough to supply the demand.

The bright side is that, when the economy does pick up, these companies will likely use this cash to re-invest (hopefully in the US).

Here we report a list of companies with fast growth in operating cash flows, measured by the ratio free operating cash flow/revenue. Do you think these companies will benefit more than most from the economic recovery?

Use this list as a starting-off point for your own analysis.

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List sorted by market cap.

1. Vale S.A. (VALE): Industrial Metals & Minerals Industry. Market cap of $144.91B. TTM free operating cash flow/revenue at 0.14 vs. 5-year average at 0.06. The stock is currently stuck in a downtrend, trading 5.98% below its SMA20, 8.57% below its SMA50, and 12.62% below its SMA200. The stock has had a couple of great days, gaining 10.55% over the last week. The stock has performed poorly over the last month, losing 13.65%.

2. Philip Morris International, Inc. (PM): Cigarettes Industry. Market cap of $121.30B. TTM free operating cash flow/revenue at 0.07 vs. 5-year average at 0.03. The stock has had a couple of great days, gaining 6.41% over the last week.

3. Bank of America Corporation (BAC): Regional Banks Industry. Market cap of $75.73B. TTM free operating cash flow/revenue at 1.04 vs. 5-year average at 0.46. This is a risky stock that is significantly more volatile than the overall market (beta = 2.23). The stock has had a couple of great days, gaining 10.19% over the last week. The stock has performed poorly over the last month, losing 22.05%.

4. Visa, Inc. (V): Business Services Industry. Market cap of $68.61B. TTM free operating cash flow/revenue at 0.35 vs. 5-year average at 0.10. The stock has had a couple of great days, gaining 5.94% over the last week.

5. Bristol-Myers Squibb Company (BMY): Drug Manufacturers Industry. Market cap of $48.63B. TTM free operating cash flow/revenue at 0.10 vs. 5-year average at 0.02. Offers a good dividend, and appears to have good liquidity to back it up--dividend yield at 4.63%, current ratio at 1.99, and quick ratio at 1.79. The stock has had a couple of great days, gaining 7.75% over the last week.

6. CVS Caremark Corporation (CVS): Drug Stores Industry. Market cap of $46.24B. TTM free operating cash flow/revenue at 0.04 vs. 5-year average at 0.01. The stock has had a couple of great days, gaining 7.24% over the last week.

7. Union Pacific Corporation (UNP): Railroads Industry. Market cap of $44.87B. TTM free operating cash flow/revenue at 0.08 vs. 5-year average at 0.02. The stock has gained 23.1% over the last year.

8. U.S. Bancorp (USB): Regional Banks Industry. Market cap of $43.09B. TTM free operating cash flow/revenue at 0.52 vs. 5-year average at 0.21. The stock is currently stuck in a downtrend, trading 8.83% below its SMA20, 8.98% below its SMA50, and 12.37% below its SMA200. The stock has performed poorly over the last month, losing 10.39%.

9. Apache Corp. (APA): Independent Oil & Gas Industry. Market cap of $42.92B. TTM free operating cash flow/revenue at 0.13 vs. 5-year average at 0.07. The stock has had a couple of great days, gaining 6.11% over the last week. The stock has performed poorly over the last month, losing 16.48%.

10. Goldcorp Inc. (GG): Gold Industry. Market cap of $41.35B. TTM free operating cash flow/revenue at 0.08 vs. 5-year average at 0.01. The stock has gained 20.98% over the last year.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Stocks


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