The seemingly endless coronavirus nightmare has forced stock investors to scramble for places to hide, and companies with more cash than debt reportedly may offer some shelter in the storm.
For investors trying to assess what companies have the best shot at making it through the outbreak and able to capitalize on demand when it returns, those companies with plenty of cash are well-positioned, Barron’s recently explained.
Strong balance sheet stocks have outperformed in recent weeks, Goldman Sachs strategists recently advised clients.
Wolfe Research senior macro research analyst Chris Senyek screened for companies with balance sheet strength and liquidity to weather further challenges.
Technology companies fill up the list. Among the companies Senyek found: Twitter (TWTR), which has 20% cash to market cap. Arista Networks (ANET), IPG Photonics (IPGP), Dolby Laboratories (DLB) and Electronic Arts (EA) had the highest net cash to market value.
Meanwhile, companies of all sizes are frantically trying to cut costs, yet keep business afloat however possible amid an undetermined future.
Walt Disney Co, JPMorgan Chase & Co and United Parcel Service Inc were among seven major U.S. companies that accepted a big rise in their borrowing costs to issue bonds on Thursday, as the coronavirus outbreak roiled credit markets.
The companies, that also included Citigroup Inc, Morgan Stanley, Northrop Grumman Corp and MetLife Inc, raised a combined $18.6 billion through the issuance of investment-grade bonds, according to Refinitiv IFR data.
Disney issued five new bonds, including a $1.25 billion 10-year loan which priced at a 270 basis point premium to U.S. Treasuries at a 3.8% yield. By comparison, Disney raised $2 billion in September with a premium of only 70 basis points and a yield of around 2.2%.
The higher borrowing costs indicate that strain persists in the credit markets, despite the efforts of governments and central banks to support the financial system. The U.S. Federal Reserve has taken a series of steps over the last two weeks to boost liquidity, including cutting borrowing costs to near zero and embarking on large-scale asset purchases, Reuters explained.
The novel coronavirus has infected more than 200,000 people globally but may be in its early stages in the United States. It has prompted many countries to order businesses to close and restrict movements of entire populations to limit its spread.
Material from Bloomberg, Reuters and the Associated Press has been used in this report.
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