S&P 500 Firms Boost Cash To Highest Level In Decade

S&P 500 Firms Boost Cash To Highest Level In Decade

It looks like the ongoing global economic uncertainty is starting to hit home, as major American firms are starting to pile up cash instead of investing it. A September 24th report from FactSet Insight highlights that the S&P 500 (ex-Financials) cash and short-term investments in the second quarter totaled $1.43 trillion, the second highest level in a decade.

As FactSet research analyst Andrew Birstingl notes:”This amount reflected 5.5% growth on a year-over-year basis and 3.9% growth quarter-over-quarter. Seven out of nine sectors posted positive year-over-year growth, with the Consumer Discretionary (-0.8%) and Industrials (-0.9%) sectors being the only decliners.”

Breakdown of S&P 500 2Q 2015 cash balances

Star hedge fund macro trader Colin Lancaster warns: Inflation is back

InvestorsTalk of inflation has been swirling for some time amid all the stimulus that's been pouring into the market and the soaring debt levels in the U.S. The Federal Reserve has said that any inflation that does occur will be temporary, but one hedge fund macro trader says there are plenty of reasons not to Read More

FactSet data shows that the IT sector had the largest cash balance ($546.3 billion) in the S&P 500 at the end of the second quarter. Five of the top 10 companies in terms of  quarterly cash balance were in this sector: Microsoft at $96.5 billion, Google at $69.8 billion, Cisco Systems at $60.4 billion, Oracle at $54.4 billion and Apple at $34.7 billion. The Telecom and Utilities sectors were the leaders in year-over-year growth in 2Q. The Telecom sector, which has historically kept the smallest average cash balance, ended the second quarter with $28.2 billion in cash, a 28.4% increase year over year. The Utilities sector had the smallest cash balance at the end of the quarter with $27.2 billion in cash, a move up of 15.3% year-over-year.

S&P 500

In transactions of note in the second quarter, AT&T marketed $17.4 billion in bonds to finance its $65 billion acquisition of DIRECTV. This was the third-largest corporate debt issue ever, and pushed the firm’s cash balance up by $6.9 billion from a year ago. In addition, Frontier Communications sold $2.6 billion in stock to fund its $10.5 billion purchase of Verizon’s wireline operations in several states, announced in February of this year. This led to a year-over-year cash balance increase of $2.3 billion for Frontier.

Cash in the Utilities sector was also boosted when Exelon, the U.S. nuke operator, sold $4.2 billion worth of bonds to finance its recent acquisition of Pepco Holdings.

Capex slumping

S&P 500

Capital expenditures for the s&P 500 cane to $153 billion in the second quarter, a notable 5.6% decrease from 2Q year ago. This 5.6% drop off represents the biggest year-over-year decline in capex since the summer of 2010. Birstingl motes that the second quarter of 2015 was only the second time that the S&P 500 (ex-Financials) saw a year-over-year decline in capex.

Looking at capex by sector, the Energy, Industrials, Materials, and Telecom groups all saw negative capex growth in the second quarter on a year-over-year basis. The Energy sector saw a massive 23.8% decrease, while the Industrials sector followed with a 13.5% decline. Keep in mind that historically Energy firms have spent the most on capex compared to the sectors. In fact, the sector represented 26% of CapEx for the S&P 500 (ex-Financials) in mid-2015, so when it slumped, capex for the whole index fell. Somewhat shockingly, 77% of the firms in the Energy sector had year-over-year declines in capital expenditures in the second quarter.

S&P 500

No posts to display