Cash Cow: Of the 50 Largest US Companies, Who has the Cash? Who has the Debt? The concept of “sideline cash” as widely believed and highly touted by mainstream media is mathematically impossible

Cash Cow: Of the 50 Largest US Companies, Who has the Cash? Who has the Debt?

Posted: 01 Apr 2013 08:37 AM PDT

Mike “Mish” Shedlock

Here’s the question of the day: How much actual cash is on hand at corporations? Fed by glowing reports from sell-side analysts, most investors are unaware that except for a handful of companies, there is no cash, only debt. Even counting short-term investments there is surprisingly little cash on hand. Courtesy of Mike Klaczynski at Tableau Software please consider the latest update to my periodic “Cash Cow” interactive report.

CashThe data for this sheet is from Yahoo!Finance. Scroll over any of the bars (not the company name) to see more details.

Cash is a liability not an asset for banks, so I left off financial corporations in the default map. Certainly the $277 billion in cash on hand at Bank of America is not a sign of genuine strength or profitability.

As you can see, actual cash on hand at non-financial corporations is a net negative $850 billion.

Five Cash Cows With Genuine Cash

Apple (AAPL) $16.15 Billion

Chevron (CVX) $8.03 Billion

Google (GOOG) $7.57 Billion

Qualcomm (QCOM) $4.26 Billion

Amazon (AMZN) $3.70 Billion

The grand total of actual available cash (at the five companies that have any) is $39.71 billion.

To add in short-term investments, click on the Select Metric drop-box that looks like this:

Here are the results.

10 Cash Cows Counting Short-Term Investments

Microsoft (MSFT) $54.09 Billion

Google (GOOG) $40.88 Billion

Apple (AAPL) $39.82 Billion

Cisco (CSCO) $30.09 Billion

Oracle (ORCL) 13.94 Billion

Qualcomm (QCOM) $13.24 Billion

Chevron (CVX) $8.30 Billion

Amazon (AMZN) $7.07 Billion

Intel (INTC) $4.59 Billion

Johnson & Johnson (JNJ) $4.03 billion

Net Negative Cash

Counting short-term investments, net corporate cash of the 50 largest companies is negative $543.67 billion.

Total cash of the 10 companies that have positive balance sheet cash (counting short-term investments as a cash equivalent) is $216.05 billion.

This is a far cry from the $trillions in sideline cash we are told is ready to come pouring into the market any time now. The facts of the matter are:

Sideline cash is a direct function of debt

Sideline cash cannot come into the market to propel shares higher because for every buyer of a security there is a seller, except for debt offerings and IPOs

Yet, the concept of “sideline cash” as widely believed and highly touted by mainstream media is mathematically impossible.

It is possible however, for a corporation to use its cash to buy back shares, but in that case, sideline cash will be transferred to another account (frequently the cash account of an insider who is bailing).

Recall that investors wanted Apple to buy back shares last Autumn, thinking they were undervalued at $700. Today’s price is $435.

Had Apple been foolish enough to buy back shares when everyone seemed convinced the next stop was $1000, Apple’s share price would undoubtedly be lower today, reflective of the amount of cash it wasted on buybacks.

2009 and 2010 provided excellent opportunities for corporations to buy back shares. Bargains have long since vanished.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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