Please ensure Javascript is enabled for purposes of website accessibility

Large American Companies Amassing Cash, Hesitant to Spend

By Kapit all – Updated Apr 6, 2017 at 6:45PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Why are companies sitting on this cash?

Many of the largest U.S. 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, Microsoft, and Cisco 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 rehiring, because the U.S. 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 reinvest (hopefully in the U.S.).

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. List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)

1. Vale (Nasdaq: VALE): Industrial Metals & Minerals Industry. Market cap of $144.91B. TTM free operating cash flow/revenue at 0.14 vs. five-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 (NYSE: PM): Cigarettes Industry. Market cap of $121.30B. TTM free operating cash flow/revenue at 0.07 vs. five-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 (NYSE: BAC): Regional Banks Industry. Market cap of $75.73B. TTM free operating cash flow/revenue at 1.04 vs. five-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 (NYSE: V): Business Services Industry. Market cap of $68.61B. TTM free operating cash flow/revenue at 0.35 vs. five-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 (NYSE: 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 (NYSE: CVS): Drug Stores Industry. Market cap of $46.24B. TTM free operating cash flow/revenue at 0.04 vs. five-year average at 0.01. The stock has had a couple of great days, gaining 7.24% over the last week.

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

8. US Bancorp (NYSE: USB): Regional Banks Industry. Market cap of $43.09B. TTM free operating cash flow/revenue at 0.52 vs. five-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 (NYSE: APA): Independent Oil & Gas Industry. Market cap of $42.92B. TTM free operating cash flow/revenue at 0.13 vs. five-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 (NYSE: GG): Gold Industry. Market cap of $41.35B. TTM free operating cash flow/revenue at 0.08 vs. five-year average at 0.01. The stock has gained 20.98% over the last year.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Alexander Crawford does not own any of the shares mentioned above Free operating cash flow/revenue data sourced from Screener.co, all other data sourced from Finviz.

The Motley Fool owns shares of Bank of America, Microsoft, Apple, and Philip Morris International. The Fool owns shares of and has created a bull call spread position on Cisco Systems. Motley Fool newsletter services have recommended buying shares of Cisco Systems, Visa, Philip Morris International, Apple, and Microsoft. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. 

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Union Pacific Corporation Stock Quote
Union Pacific Corporation
UNP
$203.97 (-2.49%) $-5.20
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$31.73 (-2.37%) $0.77
Visa Inc. Stock Quote
Visa Inc.
V
$183.96 (-0.98%) $-1.83
U.S. Bancorp Stock Quote
U.S. Bancorp
USB
$42.12 (-2.12%) $0.91
CVS Health Corporation Stock Quote
CVS Health Corporation
CVS
$98.35 (-1.48%) $-1.48
Philip Morris International Inc. Stock Quote
Philip Morris International Inc.
PM
$91.79 (-4.18%) $-4.00
Bristol Myers Squibb Company Stock Quote
Bristol Myers Squibb Company
BMY
$70.71 (-0.81%) $0.58
Goldcorp Inc. Stock Quote
Goldcorp Inc.
GG
Apache Corporation Stock Quote
Apache Corporation
APA
$32.87 (-11.43%) $-4.24

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.