Public companies world-wide continue to hoard a significant portion of their assets in cash and cash equivalents rather then investing them. Large US firms are among the top hoarders of cash. There are a few logical reasons for holding cash such as taxation on profits repatriated to the US from overseas. But the negative effects of hoarding cash outweighs the positive and logical reasoning. For example, companies usually tend to waste shareholders wealth on acquiring other firms at unjustified prices just because they have tons of cash and management is incompetent to deploy it on productive purposes.
Global Finance magazine published a ranking of the world’s top 25 public firms based on cash on their balance sheet. The methodology used to select the firms:
The Global Finance Cash 25 ranks public companies by cash, cash equivalents and short-term securities on their balance sheets. Data is gathered from more than 70,000 public companies worldwide. It is a ranking of nonfinancial corporations—we exclude financial institutions from the list. Subsidiaries and nonpublic companies are excluded, and we use a minimum 25% holding for the path from a subject company to its ultimate owner as the cutoff for inclusion.
The Top 25 Global Public Companies by Cash on their Balance Sheet:
|Cash^ ($m) Previous Year||Change (YoY $m)||Total
|6||JOHNSON & JOHNSON||US||Consumer Products||38376||33089||5287||133411|
|8||TOTAL||France||Oil and Gas||29459||26474||2985||224484|
|12||SAMSUNG ELECTRONICS||South Korea||Consumer Electronics||23253||18309||4944||206550|
|14||HON HAI PRECISION INDUSTRY||Taiwan||Consumer Electronics||20143||21572||-1429||70038|
|22||HYUNDAI MOTOR||South Korea||Automotive||14883||19969||-5085||141039|
|25||GREE ELECTRIC||China||Consumer Products||13682||8928||4755||24,90|
* FY 2014, all others FY 2015 ^Includes cash, cash equivalents and short-term securities (those maturing between three months and a year). Data valid as of July 21, 2016.
Source: The World’s Richest Companies 2016: Global Cash 25, Global Finance
A few observations:
- US tech firms such as Cisco(CSCO), Interl(INTC), Apple(AAPL), Microsoft (MSFT) etc. hold billions in cash. Unlike other industries tech companies tend to use their cash more for growth by acquisitions than use it for organic growth.
- Globally automotive firms also hoard large amounts of cash.
- While large cash hoards helps management to deploy it any way they wish, they do not mean much to shareholders. In fact, some investors prefer firms to invest the cash productively or distribute them to shareholders.
Disclosure: No Positions