U.S. companies are sitting on the largest pile of cash ever. Investors are trying to gauge how they are going to use it.
Cash holdings at nonfinancial companies grew to a record $2.1 trillion at the end of June, according to a report from Moody’s Investors Service. That is up 30% from that time last year and higher than the previous peak of nearly $2 trillion in 2017. Among the biggest hoarders: AT&T Inc. and Delta Air Lines Inc., which each held more than $15 billion at the end of June.
Other measures show some of America’s largest companies continued to hang on to record cash stockpiles at the end of the third quarter. The amount held by S&P 500 companies not in the financial, transportation or utility sectors is expected to total around $1.9 trillion, according to data compiled by S&P Dow Jones Indices. That is the most cash ever held by that group in data going back to 1980.
Among investment-grade borrowers tracked by BNP Paribas , the ratio of current assets to current liabilities—which BNP uses to estimate liquidity—has risen this year to 86% in Europe and 97% in the U.S. Those levels have only been exceeded since 2000 during late 2009-early 2010 in the U.S. and mid-2004 in Europe.
Companies in the Stoxx Europe 600 have also posted a similar rise, with average short-term liquidity ratios forecast to finish 2020 at 172%, up from 159% at the end of 2019 among companies for which data is available in FactSet. In the S&P 500, companies are forecast to finish the year at 192%, up from 170%.
