Wall Street's Message to CEOs: Start Spending That Cash
Survey finds investors calling for capital expenditure and incremental hiring over buybacks and dividends
Technology and Financial companies overwhelmingly identified as greatest holders of excess cash
NEW YORK, Feb. 24, 2015 /PRNewswire/ -- Convergex, an agency-focused global brokerage and trading related services provider, has released the results of its Corporate Cash Survey, quantifying financial industry sentiment about current elevated levels of corporate cash holdings. Conducted from February 10 to February 12, 2015, the results reveal an investment community that overwhelmingly believes large publicly owned U.S. corporations currently hold too much cash on their balance sheets.
Respondents to the survey emphatically say that companies are holding excess funds: nearly three-quarters (72%) said "too much cash" or "way too much cash" is currently on the books. Specific industries were singled out in the results, with the Technology sector definitively identified as the greatest offender. Seventy-three percent (73%) of investment professionals said technology companies are holding too much cash, followed by the Financial sector (43%) and Industrials (26%).
Asked why corporations are reluctant to spend, financial professionals identified Economic Uncertainty (37%) as the top reason, followed by Regulatory Uncertainty (27%) and Uncertainty Over Central Bank Policy (10%). In a similar vein, investors said that they themselves have more wealth kept in cash than before the financial crisis, with almost half (49%) saying they hold "more" or "much more" now, compared with only sixteen percent (16%) who said "less" or "much less."
"Despite these rationales, our survey shows that investors want corporate leaders to open up the checkbook," said Nicholas Colas, Convergex chief market strategist. "And while the loudest voices may be calling for return of capital to investors, our respondents were decidedly against the conventional wisdom, instead calling for spending aimed at growth. Almost two-thirds (61%) named Capital Expenditure, Incremental Hiring or Acquisitions as their preferred use of excess cash, while just thirty-nine percent (39%) chose Dividends or Buybacks."
For more information on the Convergex Corporate Cash Survey, click here.
"Twenty Minute Talk"
Please join us for a fast-paced 20 minute conference call on the topic of Excess Corporate Cash, reviewing these survey results and providing additional insight, on Thursday, February 26, 8:00 a.m. ET. Dial-in information can be found here.
Too. Much. Cash.
Do you believe large publicly owned corporations are currently holding…
- Way Too Much Cash – 12%
- Too Much Cash – 60%
- Right Amount of Cash – 20%
- Too Little Cash – 7%
- Way Too Little Cash – 1%
Why So Serious?
If you believe U.S. corporations are holding too much cash, what do you believe is the single most important reason why?
- Economic Uncertainty – 37%
- Regulatory Uncertainty – 27%
- Lack of Investment Opportunities – 26%
- Uncertainty Over Central Bank Policy – 10%
Tagging Technology
In which sectors are companies holding too much cash? (Select all that apply)
- Technology – 73%
- Financials – 43%
- Industrials – 26%
- Health Care – 24%
- Consumer Staples – 18%
- Energy – 16%
- None – 5%
Going For Growth
If you believe a large U.S. corporation is holding too much cash, how would you prefer they use it?
- Capital Expenditure – 35%
- Initiate or Increase Dividends – 24%
- Incremental Hiring – 16%
- Stock Buybacks – 15%
- Acquisitions – 10%
Do As I Say, Not As I Do?
Do you personally hold more or less cash than you did before the financial crisis?
- Much More Cash – 8%
- More Cash – 41%
- Same Amount – 35%
- Less Cash – 13%
- Much Less Cash – 3%
Methodology
The Convergex Corporate Cash Survey was performed by Convergex via an online survey of financial industry participants, resulting in 188 respondents. The survey was conducted from February 10 to February 12, 2015, and has a margin of error of +/-10%. Respondents included buy-side firms (asset managers, hedge funds), sell-side firms (banks, broker-dealers), trading venues, service providers and other financial industry participants. Rounding of decimal results may produce totals over or under 100% (by 1%).
About Convergex
Convergex is an agency-focused global brokerage and trading related services provider that takes on the industry's toughest challenges, from complicated trades to complex businesses. With clients' interests as the top priority, Convergex delivers comprehensive solutions that span global high-touch and electronic trading, options technologies, prime brokerage, clearing, commission management and beyond. Headquartered in New York with a presence in several other locations including Atlanta, Boston, Chicago, Orlando, San Francisco and London, the company serves nearly 3,000 clients accessing over 100 global market centers. Convergex provides brokerage services primarily on an agency basis, but may operate in a riskless principal and/or net trading capacity, and in connection with certain ETF or ADR transactions, may act as principal or engage in hedging strategies with such transactions. Convergex does not engage in market making or investment banking activities, other than as a selling group member.
In the U.S., Convergex offers products and services through Convergex Execution Solutions LLC (member NYSE/FINRA/SIPC); G-Trade Services LLC (member FINRA/SIPC); Westminster Research Associates LLC (member FINRA/SIPC); Convergex Depositary, Inc., and Convergex Solutions LLC, of which Connex, Jaywalk and LDB are divisions.
In London, Convergex operates through Convergex Limited, which is incorporated in England and Wales (registered with company number 06262150). Convergex Limited is authorized and regulated by the Financial Conduct Authority (FCA) of the United Kingdom.
The material, data and information (collectively "Convergex Information") that is available from Convergex is intended for institutional investor use only; is for informational purposes only; is subject to change at any time; is not intended to provide tax, legal or investment advice; and does not constitute a solicitation or offer to purchase or sell securities. Convergex Information is believed to be reliable, but Convergex does not warrant its completeness or accuracy. Clients should read their agreement with Convergex carefully as it contains important information and disclosures about the product or service covered by it. (Rev. 12/2/14)
Please be advised that options carry a high level of risk and are not suitable for all investors. To receive a copy of the Options Disclosure Document, please contact the Convergex Compliance Department at (800) 367-8998.
Contact: Michael Kingsley
[email protected]
212.468.7713
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SOURCE Convergex
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