The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (TheStreet) -- Amid continued concerns about the unemployment rate and torpid U.S. economy, many of the nation's largest corporations have been quietly stockpiling huge cash reserves, too uneasy about future market conditions to hire new employees or even invest in their own operations.
Analysts say second-quarter earnings reports for Dow Jones Industrial companies reveal that cash and short-term investments at 24 of the 30 companies has grown to $256 billion, up 18% from one year ago. Among companies with larger-than-normal cash reserves are Caterpillar (CAT) (up threefold); Microsoft (MSFT) (up 43%); Johnson & Johnson (JNJ) (up 57%); and Coca Cola (COKE) (up 38%). Apple (AAPL), it is worth noting, reported a cash reserve of $75.876 billion, more than the U.S. government.
In recent months, with stock prices under pressure and cash on hand, companies such as AOL (AOL) and News Corporation (NWS) announced that they will use those cash reserves to buy back their own stocks. They join a long list of others that have announced stock repurchase programs, including giants such as Best Buy (BBY), Disney (DIS), Fluor (FLR), Home Depot (HD), Pfizer (PFE) and Visa (V). And the list goes on.>> Get your financial news on the go with TheStreet's iPad app. Hoarding cash seems like sound fiscal policy to many, given the 2008-09 financial crisis and credit crunch still casting a pall in the boardrooms and offices of corporate America. Long-simmering worries over the seemingly intractable debt crisis in Europe and continued economic turmoil and market volatility here at home, were naturally exacerbated by Standard and Poor's decision to downgrade the U.S. government's AAA credit rating and also by the U.S. Federal Reserve Bank's recent dreary economic forecast. While many analysts see stock-repurchase programs as a boon to share price, the strategy also has harsh detractors. When the stakes are as high as they are in this market, any company that is likely to find itself ready to authorize a share repurchase must have in place a communications plan to ensure its ultimate success in creating share value. And, with corporate credibility at or near all-time lows and shareholders willing to believe the worst until proven wrong, companies must seize the narrative before analysts and talking heads write it for them.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV