Profiting From Wall Street's Cash Bundles

By Aaron Levitt | December 09, 2009 AAA

With last year's possibility of worldwide financial doomsday and a Great Depression II scenario building, many companies did whatever they could to save money. They slashed jobs, shelved expansion plans and cut expenses to bare bones minimums. Now that the Great Recession is moving to an end and a second depression hasn't happened, firms that buckled down are sitting on record piles of cash. How much more? Analysts estimate that firms have at least $1.5 trillion more on their books in 2009 versus 2008.

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Exactly How Much Cash
Technology darling Google (Nasdaq:GOOG), for example, has raised nearly $6.2 billion this year alone. Its current war chest sits at about $22 billion and is debt free. Wireless chip maker Qualcomm (Nasdaq:QCOM) has nearly $17.7 billion in cash and short-term assets on its books. But it's not just technology companies that have been saving. General Mills (NYSE:GIS) has grown its assets to nearly $773 million through cost-saving incentives and lower commodity prices. Standard and Poor's estimates that as of November 24, total cash levels for the 3,729 nonfinancial companies trading on the Nasdaq, NYSE and AMEX had risen to a total of $1.6 trillion dollars. This is an increase of nearly 47% from the previous year.

Spending That Money
With all of those assets lining corporate coffers, the potential spending spree could be enormous as companies release the tight grip on their wallets. From acquisitions and plant upgrades to investing in additional jobs, this cash hoard could be the answer to the economy's prayers. Companies that provide these benefits to corporations will certainly benefit from any increased spending and will make fine additions to a portfolio.

As a leading IT consultant, Cognizant Technology (Nasdaq:CTSH) could see a lion's share of business as companies begin to improve their data centers and networks. The company recently reported a 16% increase in revenue for the third quarter of 2009. Incidentally, the company itself is sitting on a cash stock pile of nearly $1.2 billion.

As the auto industry declined, so did Johnson Controls (NYSE:JCI). As the leading manufacturer of batteries and other automotive interior parts, the company's stock sank all the way down to the single digits. Johnson does, however, have an ace up its sleeve. The company is one of the leaders in building automation and HVAC controls. It has been smart in shifting its resources away from its traditional automotive businesses and into its more green offerings. A recent retro-fit of the Empire State Building will cut energy use by 38% per year. Johnson Controls should see an increase in business as companies demand more efficient working environments.

All of this corporate spending should lead to more jobs and better employment rates. As a leading provider of staff solutions, Manpower's (NYSE:MAN) shares have steadily increased as the U.S. economy has lost fewer jobs. Increased savings through various other means and corporations' large cash hoards could signal a phase in boom hiring. Manpower will benefit from that phase. In the meantime, investors can be satisfied with a 1.5% dividend yield.

Bottom Line
As corporations prepared for the next Great Depression, they hoarded cash. Now that those predictions of worldwide financial doomsday have subsided, many are looking to deploy that cash. Finding companies that will benefit from increased spending will bestow nice returns to any portfolio. Cognizant, Johnson Controls and Manpower provide services and products that will help companies save money and run more efficiently. All three should be benefactors of increased corporate spending. (Learn more about these types of companies in Spotting Cash Cows.)

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