Where the Richest U.S. Companies Park Their Cash
There are multiple ways that one could value how "rich" a company is. The most obvious is to rank companies by market capitalization, which is the total market value of all shares outstanding. We can also look at the companies with the most cash and then speculate on what they might do with the hoard they are sitting on.
10 biggest companies by market cap
By market cap, it's no surprise that the biggest company in the world is Apple (NASDAQ:AAPL). What is surprising is that half of the top 10 are tech companies. Also, the oldest company on the list, Johnson and Johnson (NYSE:JNJ), (which has been around for 120 years) is still less valuable than the youngest company on the list, Facebook, which is barely 12 years old.
|Company||Ticker Symbol||Market Cap (Billions)||% Change Over Last 12 Months|
|Alphabet||NASDAQ: GOOG, GOOGL||$537.8||1.4%|
|Berkshire Hathaway||NYSE: BRK-A, BRK-B||$390.4||17.2%|
|Johnson & Johnson||NYSE: JNJ||$310.5||11.9%|
|General Electric||NYSE: GE||$278.1||3.6%|
Data source: Dogs of the Dow, as of Nov. 25, 2016.
The tech companies and the consumer goods behemoth Johnson and Johnson, a big bank and an energy company -- both of which dominate their respective industries -- have good reason to be on this list. One exception is Berkshire Hathaway. Warren Buffett's iconic holding and investment company is unusual because it's the only one of its kind, an investing firm. Berkshire Hathaway has no products of its own other than the companies it has acquired and yet shares have ballooned in its 50-year history making Buffett the second wealthiest person in the country.
The richest companies in the U.S.
While market cap makes sense to calculate the most valuable companies in the U.S., most of these companies can't actually do much with market cap since they usually own only a small percentage of shares. Instead, it might be more valuable to look at companies that have the largest cash hoards, and speculate what they might do with it.
By far the wealthiest company in the U.S. by total cash value is Apple, which has a record of nearly $238 billionin cash, cash equivalents, and marketable securities in its most recent quarter. While some investors want more dividends, Apple is likely to use some of its money to get more aggressive in going after the connected-car market, artificial intelligence, or other long-term investments. Or as Salesforce.com Chief Digital Evangelist Vala Afshar points out, perhaps they could buy a few small sports franchises.
Image source: Twitter.
Other than Apple, Microsoft also has a massive cash load, though at $117 billion, it is just half the size of Apple's. We've seen from the recent LinkedIn acquisition that Microsoft is not shy about using its cash to acquire new segments. Rounding out the wealthiest companies is Alphabet with around $88 billion.
However, one important note is that most of these ultra-rich companies are holding a substantial amount of funds overseas. Apple has more than $200 billion of its cash load stashed in foreign accounts and short-term investments.The companies are holding cash outside the U.S. because they do not want to pay the standard 35% repatriation tax rate to bring cash that it has earned overseas into the U.S.
Things could start to get very interesting under President-elect Donald Trump, who has signaled that he will seek to lower this corporate tax percentage and could even provide a special 10% tax for companies that are seeking to repatriate a huge chunk of cash back to the States. There's no telling when this might happen, how much each company would bring back, or what the companies will do with the money. However, many have already made claims that they plan to repatriate cash if those campaign promises come true.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fools board of directors. Seth McNew owns shares of Apple and Johnson and Johnson. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon.com, Apple, Berkshire Hathaway (B shares), and Facebook. The Motley Fool owns shares of ExxonMobil, General Electric, and Microsoft and has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool recommends Johnson and Johnson and Salesforce.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.