In times of economic uncertainty and market volatility -- like the present moment -- it's wise to look for stocks of companies with substantial cash reserves. That's because those companies will have the flexibility to deal with economic downturns, pay their bills and dividends, and even buy out struggling competitors.
Indeed, the total amount of cash a business has access to can be a measure of its financial health. So it's good to know which companies have the most cash on hand. Right now, the 50 largest cash piles total more than $3.1 trillion, according to TradingView. And financials, consumer discretionary, and tech stocks hold 75% of that $3.1 trillion. Note that cash on hand generally includes physical currency, bank deposits, and highly liquid short-term securities with maturities of three months or less, like Treasury bills and money market funds.
It may not surprise you which U.S. company has the most cash on hand. It's Berkshire Hathaway (BRKA 0.46%)(BRKB 0.38%), of course, the giant holding company that Warren Buffett built over decades. It owns some 60 companies outright and has stakes in scores of others. Berkshire currently holds about $373 billion in cash and cash equivalents.
Berkshire built its enormous cash pile by retaining earnings from its operating businesses and dividends from investments, as well as by selling down some of its portfolio over many quarters. If there's a pullback in the market due to geopolitical uncertainties, Berkshire has a lot of ammunition to pick up discounted investments. After all, buying companies that are undervalued by the market is the Berkshire way.
The "Magnificent Seven" are currently cash rich
Second on the "cash is king" list is Alphabet (GOOG 1.69%)(GOOGL 1.66%), parent of Google and YouTube, with around $127 billion of cash on hand. The company is a cash machine, and its major units generate cash at a rate that outpaces its massive expenditures on AI data centers and infrastructure. With the race to dominate AI services now underway between Alphabet and other Magnificent Seven rivals, having a huge cash hoard is critical to success.
Speaking of rivals, Amazon (AMZN 1.52%) is third on the cash list, with about $123 billion on hand. Similar to Alphabet, the giant online retailer needs lots of cash to invest in its various AI businesses.
Two other AI rivals come next on the list, Microsoft (MSFT 0.73%) and Meta Platforms (META 2.52%), each of which has upwards of $80 billion in easily accessible cash. They too plan to spend much of it on their AI buildouts over the next few quarters.
The next company on the list might be a bit of a surprise. It's Interactive Brokers Group (IBKR 2.16%), an electronic broker and market maker, with about $82 billion in available cash. The company has generated its cash hoard via stellar profit margins and strong growth in recent years. It also has no long-term debt. That cash could prove very handy should we see a consolidation in the financial services sector in the near term.
Cash is both a defensive and offensive weapon
Having access to sufficient cash is first a defensive strategy. It keeps a company liquid if the economy turns down and revenues fall off and it allows them to deal with unexpected expenses. Cash on hand can also be an offensive weapon. It can enable a company to seize an unexpected opportunity such as acquiring a struggling competitor, buying inventory at a discount, or expanding into new markets.
Image source: Getty Images.
Cash is also critical to maintaining stability. Revenue flows for many companies are seasonal or cyclical, so building up cash in good times can keep operations going in lean ones. Buffett once said that he looked for businesses that are "drowning in cash." Less stellar investors should do the same.
