Where's the Dow's Big Money Hiding?

Some Dow Jones members are richer than others -- and the division between haves and have-nots doesn't always fall where you'd expect it.

Apr 10, 2014 at 2:00PM

It's no secret that the large companies on the Dow Jones Industrial Average (DJINDICES:^DJI) are flush with cash. But they are most definitely not equally rich. And the real King Midases aren't always the ones you might assume.

I pulled data from S&P Capital IQ to shine some light on the Dow's cash reserves. This chart covers each of the 30 Dow members' cash equivalents, plus short-term and long-term investments:


The big banks at the top of this list had their cash bars chopped off, because they would make all the others look insignificant otherwise. Even so, the banks are very different. Goldman Sachs (NYSE:GS) holds almost all of its assets in the form of short-term investments, while JPMorgan Chase (NYSE:JPM) manages 27% of its total money reserve as long-term investments.

I was surprised to find Home Depot (NYSE:HD) at the very bottom of this list, with just $1.9 billion in liquid cash and nearly zero long-term investments. I have lauded and applauded Home Depot for showing fiscal discipline after the economy's 2008 meltdown, but there's no evidence of conservative cash management here.

There's a perfectly reasonable explanation, of course. Home Depot borrowed $5.2 billion last year and tapped into its cash reserves to fund a huge share buyback program. The company retired $8.5 billion's worth of shares in 2013.

So Home Depot is more interested in returning cash to shareholders than in funding rapid expansion of its store network -- or in sitting on a huge cash pile. Share buybacks aren't necessarily the best use of company cash, but at least Home Depot has the common shareholder's interests in mind.

On the other hand, Travelers (NYSE:TRV) sits near the top of this big-money list even though it's the smallest Dow stock as measured by market cap. Ninety-four percent of the insurance giant's money is invested in long-term papers.

Travelers runs a cash-rich business with minimal capital expenses. Like Home Depot, the company pays a reasonable dividend and invests in share buybacks. Unlike Home Depot, the buybacks don't come close to exhausting each year's cash flow. More often than not, Travelers sets aside some cash for a rainy day sometime in the far future.

TRV Total Net Change in Investments (TTM) Chart

TRV Total Net Change in Investments (TTM) data by YCharts.

This makes a ton of sense for an insurance specialist. You never know when the next natural disaster, terrorist strike, or crime wave might force Travelers to pay out an exorbitant amount in big claims. Better to be prepared for the worst, or else get ready to face the music when the cash runs out.

Do any of these figures come as a shock to you, dear reader? Share your thoughts in the comments box below.

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Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs and Home Depot. The Motley Fool owns shares of JPMorgan Chase. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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