The Activist Investor Blog
The Activist Investor Blog
Who Has the Biggest Cash Hoard? 2014 Edition
We’ve followed the cash holdings of the largest US companies for some time now. Back in 2011 we claimed these holdings exacerbated the Great Recession, and then analyzed those balances. We updated this analysis in 2012 and 2013.
It’s time once again to see who leads big companies in hoarding cash. This update comes after the Federal Reserve provided its economy-wide estimate of corporate cash (see Table B.102, p.114). It reports that as of the end of 2013, US non-financial businesses held $2.1 trillion of cash and other liquid assets, up from $1.7 trillion when we first looked in 2011 (line 7, adjusted for lines 19 and 21).
The ten companies with the largest cash and liquid asset balances account for $718 billion, or about one-third of the US total. If we adjust these balances for debt, these balances become $400 billion, or almost 20% of the US total.
Here’s the top ten as of 12/31/13 (figures in $billion):
Apple
General Electric
Microsoft
Google
Verizon
Pfizer
Cisco
Chevron
Oracle
General Motors
158.8
132.5
97.7
59.4
58.5
49.2
48.0
42.0
39.1
34.3
717.5
The figure shown is total cash and investments as of 12/31/13 for each company. This figure is roughly comparable to the Federal Reserve estimate for the entire economy, seeing as it includes cash and marketable securities. These companies sit on over two-thirds of a trillion dollars in liquidity.
In fairness, it’s not all liquid, and management needs the cash to run the business (right?). So, let’s reduce the balances to reflect what the companies owe. And, we can consider what these companies earn each year in cash (free cash flow), and the cash they pay to investors (total dividends).
We get a somewhat different top ten:
Apple
Microsoft
Google
Qualcomm
Cisco
Chevron
Oracle
Pfizer
Johnson & Johnson
Facebook
net cash
141.9
74.0
52.8
31.6
30.8
21.6
12.8
12.4
11.5
11.0
400.4
FCF
31.7
17.5
8.0
6.6
10.0
(7.6)
12.9
19.1
12.1
2.6
112.8
dividend
10.8
8.1
-
2.2
3.6
7.5
1.9
6.6
7.3
-
48.1
Net cash is cash and total investments from above, net of debt, as of 12/31/13. Dividend and free cash flow are for 2013.
Some interesting things happen with this perspective:
❖GE has significant debt from their financial services businesses, so their cash hoard is much lower.
❖Facebook joins the list at number 10, after only two years as a public company.
❖It’s all tech and pharma except Chevron, which not coincidentally is the only company with negative FCF.
❖Apple has twice the net cash as the next largest company.
❖Apple and some of the other technology firms (Microsoft, Google, Qualcomm, Cisco, Oracle) have minimal debt loads relative to their cash.
❖Eight of the companies now pay a dividend relative to free cash flow, with the two youngest of the technology firms paying no dividend. Oracle pays a token dividend, while the rest pay from one-third to one-half of FCF.
These ten companies sit on a cash hoard of over $400 billion. They will likely add a decent portion of their over $100 billion in free cash flow to that hoard in a year’s time (they won’t invest every last penny of the $113 billion back into their respective businesses). Yet, they plan to return to investors less than half of a year’s cash flow, or less than an eighth of the cash that they already have on-hand.
As suggested earlier, let’s split it with them. They could easily pay $200 billion to investors, from current cash reserves, without impairing investment. What’s holding them back?
Tuesday, June 3, 2014