Households Cut Debt, Corporations Increase Cash
Jun 8th 2012 1:27PM
Updated Jun 8th 2012 1:30PM
The Federal Reserve reported that household debt fell by a seasonally adjusted 0.4% in the first quarter, after a 0.2% drop in the last quarter of 2011. Mortgage debt declined 3%, offsetting a 5.8% rise in consumer credit.
The increase in consumer credit followed a 6.7% rise during the fourth quarter of 2011, and is the biggest back-to-back increase since the first half of 2007, according to MarketWatch. The increase could be due to increased number of auto loans and student debt.
Net household worth increased $2.8 trillion to $62.9 trillion in the first quarter because of the stock market rally in the beginning of the year.
Prior to revisions, the Federal Reserve noted that companies had $2.23 trillion in cash on hand or liquid assets for the fourth quarter of 2011, but the revisions showed that they only had $1.72 trillion. For the first quarter of 2012, cash or liquid assets rose to $1.74 trillion.
The federal government's debt climbed 12.4%, which is the third straight double-digit increase.
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Households have cut their overall debt, mainly from their mortgages, while increasing their consumer credit.
Companies have far less cash on hand than previously thought, but they have increased that number from the fourth quarter of 2011.
Below is a list of large-cap companies with low or no debt and encouraging DuPont trends. Do you think these companies are lower risk because of their low debt?
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. QUALCOMM (NAS: QCOM) : Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services. Market cap at $99.43B, most recent closing price at $58.40.Total debt/equity at 0.03. MRQ net profit margin at 45.11% vs. 25.81% y/y. MRQ sales/assets at 0.119 vs. 0.114 y/y. MRQ assets/equity at 1.303 vs. 1.355 y/y.
2. Visa (NYS: V) : Operates retail electronic payments network worldwide. Market cap at $78.7B, most recent closing price at $116.34.Total debt/equity at 0.0. MRQ net profit margin at 50.12% vs. 39.24% y/y. MRQ sales/assets at 0.07 vs. 0.065 y/y. MRQ assets/equity at 1.292 vs. 1.316 y/y.
3. EMC (NYS: EMC) : Develops, delivers, and supports the information and virtual infrastructure technologies and solutions. Market cap at $51.19B, most recent closing price at $24.38.Total debt/equity at 0.09. MRQ net profit margin at 11.52% vs. 10.36% y/y. MRQ sales/assets at 0.15 vs. 0.148 y/y. MRQ assets/equity at 1.695 vs. 1.779 y/y.
4. Coach (NYS: COH) : Engages in the design and marketing of accessories and gifts for men and women in the United States and internationally. Market cap at $17.84B, most recent closing price at $62.84.Total debt/equity at 0.01. MRQ net profit margin at 20.29% vs. 19.57% y/y. MRQ sales/assets at 0.372 vs. 0.349 y/y. MRQ assets/equity at 1.539 vs. 1.562 y/y.
5. Ross Stores (NAS: ROST) : Operates off-price retail apparel and home accessories stores under the Ross Dress for Less and dd's DISCOUNTS brand names in the United States. Market cap at $13.91B, most recent closing price at $63.76. Total debt/equity at 0.09. MRQ net profit margin at 8.85% vs. 8.34% y/y. MRQ sales/assets at 0.682 vs. 0.669 y/y. MRQ assets/equity at 2.147 vs. 2.206 y/y.
6. Ralph Lauren: Engages in the design, marketing, and distribution of lifestyle products. Market cap at $13.46B, most recent closing price at $145.22.Total debt/equity at 0.08. MRQ net profit margin at 5.82% vs. 5.13% y/y. MRQ sales/assets at 0.3 vs. 0.286 y/y. MRQ assets/equity at 1.483 vs. 1.507 y/y.
7. Fastenal: The Company Is Engaged As A Wholesaler And Retailer Of Industrial And Construction Supplies. Market cap at $11.67B, most recent closing price at $39.51.Total debt/equity at 0.0. MRQ net profit margin at 13.03% vs. 12.42% y/y. MRQ sales/assets at 0.424 vs. 0.42 y/y. MRQ assets/equity at 1.178 vs. 1.18 y/y.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Danny Guttridge does not own any of the shares mentioned above.
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