Nine companies in the S&P 500, including communications services giant Alphabet (GOOGL), and technology stalwarts Apple (AAPL) and Microsoft (MSFT), each hold net cash of $5 billion apiece or much more. Together these companies hold a total of $325 billion free and clear after subtracting total debt.
All told these S&P 500 non-financial companies are sitting on net cash and short-term investments of $592 billion. That leaves them with $325 billion — even after subtracting the $267 billion they owe in total debt. This Investor’s Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith highlights companies prepared to handle what the coronavirus stock market crash may dish out.
And not surprisingly, these are among the best-run companies in the world. Eight of the nine S&P 500 companies command top-notch IBD Composite Ratings of 90 or higher. And Microsoft is one of the last U.S. companies to still carry the gold-standard AAA rating from S&P.
You shouldn’t be buying these stocks now. But you’ll at least know they have pockets deep enough to handle the coronavirus stock market crash.
You can’t say that for all firms.
Cash Is King In Tech
Given that nearly all S&P 500 firms will see massive slowdowns in their business, cash will determine who will be around for the recovery.
The information technology sector did a solid job adding to its cash pile during the historic economic expansion. And unlike many firms, it didn’t pile on deceptively cheap debt. That’s one reason the Technology Select Sector SPDR ETF (XLK) is down just 21.6% this year. The S&P 500 itself is down nearly 27%. The heavily indebted energy sector is down 61% this year.
S&P 500 Net Cash King: Alphabet
Alphabet doesn’t have the most cash at $120 billion. Apple has more (if you include its Treasury securities) at $207.1 billion.
But what makes Alphabet the cash king with $104 billion in net cash is it didn’t join the corporate debt bubble. Alphabet carries just $16 billion in total debt, a modest amount for a company its size. Apple, in contrast, carries $117 billion in total debt.
Alphabet’s debt is so low, it only paid $100 million in interest over the past 12 months. Just one year of adjusted cash flow of $48.1 billion is enough to pay its annual interest expense for 500 years.
No wonder shares are down less than the market, 18.5%, this year.
S&P 500 Tech: Financial Discipline
Microsoft’s prudent capital management is paying off now. The company, with an IBD Composite Rating of 98, is down just 8.9% this year.
Shares of Microsoft are skating through the coronavirus stock market crash despite major disruptions in its business. With $134 billion in cash and manageable debt of $87.1 billion, Microsoft is sitting on a net cash pile of $47 billion.
Keep in mind, too, by keeping its AAA rating intact, Microsoft’s annual interest expense is just $2.6 billion. That’s just a fraction of the $61 billion the company generated in adjusted cash flow the past 12 months. Even if cash flow falls, Microsoft has plenty of financial firepower.
Some tech companies like Nvidia (NVDA) shied away from debt even more. The graphics chip maker only has $2.6 billion in debt, while holding nearly $11 billion in cash.
Nvidia’s stock is down more than most of these cash-rich companies’ this year. But investors will at least take comfort these companies have cash in the bank.
S&P 500 Companies With The Most Net Cash
Source: IBD, S&P Global Market Intelligence, net cash based on most recent period, net cash is a company’s cash and short-term investments minus total debt. Apple’s cash includes long-term investments of $99.9 billion invested in U.S. Treasuries.
Author: Matt Krantz
Source: Investors: $325 Billion In The Bank: Nine Companies Ready For Any Crisis