- Microsoft & Berkshire Hathway tops the list of companies with most cash reserves followed by Alphabet Inc.
- Apple, Facebook & Amazon also made it to the list of companies with the most cash.
American businesses are sitting on cash deposits, worrying creditors and causing some on Wall Street to ask why they’re not investing.
According to FactSet estimates, Microsoft currently has the largest cash pile of $136.6 billion in the last quarter. At $128.2 billion, $121.2 billion, and $100.6 billion respectively, Berkshire Hathaway, Google, and Apple hold the other top spots.
The rest of the top 10 list is completed by Google, Amazon, Toyota, Microsoft, Cisco, and Bristol-Myers. Such estimates include the cash balance of the company as well as short-term investments such as shares.
Companies can spend by traditional means such as capital investment and acquisitions, as well as through buybacks and dividends, returning money to shareholders. Many argue that the latter— especially buybacks — is a short-term boost for investors to the detriment of the company’s long-term health and the broader economy.
There are many possible reasons why companies don’t invest more because of their vast reserves, one of which is that they just wait for the right time.
“I think acquisitions are something all these companies are thinking about as we move on in the cycle and they are looking for ways to keep their top-line growth accelerating,” Christopher Eberle, an analyst at Nomura told CNBC.
In particular, technology companies like to sit on cash, said Evercore’s Lee Horowitz, holding “dry powder as a way to survive cyclical downturns” and taking advantage of market pullbacks to pick up properties.
That’s not to suggest they’re not investing at all these businesses. Ford, IBM, Bristol-Myers, Oracle, Microsoft, and Apple are all currently paying a dividend, and this year all 10 firms have bought back stock apart from Amazon. But it’s not enough for some experts to say.
Horowitz claims that, given the increased regulatory environment, while M&A will continue, it will be on a smaller scale. He said it’s going to be hard to make big acquisitions because there’s “too much media risk.”
He referred to Amazon as an example, whose recent purchases include Ring for $900 million and PillPack for $735 million, Horowitz said he expects transactions will continue around the $1 billion levels. He does not expect acquisitions on the size of Whole Foods that the tech company bought in cash in 2017 for $13.7 billion.
Microsoft, with the largest cash reserve at $136.6 billion, was also purchasing. Recent acquisitions include the start-up of online advertising PromoteIQ, BlueTalon data company, and Drawbridge digital advertising. The last big acquisition of the company was in June 2018 when it acquired GitHub in stock for $7.5 billion. The company also returned almost $8 billion to shareholders last quarter through buybacks and dividends, a 28 percent year-over-year rise.
Although these ten firms have a lot of cash on hand, average cash balances across U.S. firms plummeted last year as corporations continued to pivot cash after the tax overhaul in 2017.
According to Moody’s Investor Services, which surveyed 928 non-financial U.S. firms, total cash balances dropped to a three-year low of $1,685 trillion.
You can read the whole report here.
