CEOs across the country have one thing to say about the threat of a double-dip recession: “Bring it on.”
U.S. companies in the S&P 500 have more than 10 percent of their assets in cash, the most ever, according to Goldman Sachs. This allows them to deploy buybacks, mergers, dividends or capital investment to combat a slowdown in Europe, investors said.
“CEOs I speak to learned their lesson” following two recession in the last ten years, said Joseph Terranova, Virtus Investment Partners Chief Market Strategist. “The minute confidence comes back, there is something sitting there the market has never seen before.”
Stocks are rebounding on optimism that global economic growth will hold up even in the face of a debt crisis unfolding in Europe. China said that exports increased 50 percent, lifting shares of companies leveraged to their economy like Caterpillar, the biggest mover in the Dow Jones Industrial Average. The Dow closed down 12 percent from its 2010 high on Wednesday.
“Companies with high free cash flow yields are likely to pursue M&A or return cash to shareholders via dividends and buybacks,” wrote David Kostin, Goldman’s chief U.S. equity strategist in the note to clients today. Kostin predicts the S&P 500 will hit 1250 as this cash is deployed and recommends specifically stocks from the firm’s “dividend growth basket.” Names in that basket include Altria, Abbott Labs and Clorox .
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Cash relative to assets is much higher than it was at this stage of the economic recovery that began in 2002. It was less than 6 percent in mid-2002, according to the report. Goldman removed financial firms when calculating the cash-to-assets ratio.
“The cash is one of the reasons why we’re not seeing a deep dive into a bear market here,” said Terranova. The ‘Fast Money’ trader also recommends Abbott Labs, which increased its quarterly dividend by 10 percent in February.
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Trader disclosure: On June 10, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Kelly owns (GS) puts; Kelly owns (SPY) puts; Terranova owns (IPSU), (BX), (UDN), (PFE), (RSX), (TER), (AXP), (BMO), (BBY), (DIS), (XCO), (SWN), (GLD), (AAPL), (IPI), (SU), (V), (TEVA), (FXB), (CVS); Adami owns (AGU), (BTU), (C), (GS), (INTC), (MSFT)
Joe Terranova
Terranova works for (VRTS)
Terranova is chief market strategist of Virtus Investment Partners, LTD.
Virtus Investment Partners owns more than 1% of (AMKR)
Virtus Investment Partners owns more than 1% of (IGE)
Virtus Investment Partners owns more than 1% of (DBV)
Virtus Investment Partners owns more than 1% of (XLB)
Virtus Investment Partners owns more than 1% of (XLV)
Virtus Investment Partners owns more than 1% of (XLY)
Virtus Investment Partners owns more than 1% of (XLI)
Virtus Investment Partners owns more than 1% of (XLU)
Virtus Investment Partners owns more than 1% of (DRYS)
For Anthony Scaramucci
SkyBridge Capital owns the UK Pound
SkyBridge Capital owns Gold
Scaramucci owns (GS) and (GS) Puts
Scaramucci and Skybridge Capital own (JNJ)
Brian Kelly
Kanundrum Capital is short (GS)
Kanundrum Capital is short (FXI)
Kanundrum Capital is short (RSX)
Kanundrum Capital is short (XLY)
Kanundrum Capital is short (XLK)
Kanundrum Capital is short (XLE)
Kanundrum Capital is short (XLB)
Kanundrum Capital is short (FCX)
Kanundrum Capital is short EURO
Kanundrum Capital is short POUND
Kanundrum Capital is short SWILL
Kanundrum Capital U.S. DOLLAR
Kanundrum Capital owns (GLD)
Kanundrum Capital owns (TLT)
Kanundrum Capital owns (GFI)
Kanundrum Capital owns (AUY)
Kanundrum Capital owns (GDXJ)
Patty Edwards
Edwards owns (AA) for clients
Edwards owns (GE) for clients
Edwards owns (NSC) for clients
Edwards owns (UNP) for clients
Edwards owns (INTC) for clients
Edwards owns (STM) for clients
Edwards owns (TXN) for clients
Edwards owns (NVDA) for clients
Edwards owns (AAPL) for clients
Edwards owns (HPQ) for clients
Edwards owns (MSFT) for clients
Edwards owns (DELL) for clients
Edwards owns (GOOG) for clients
Edwards owns (JPM) for clients
Edwards owns (BAC) for clients
Edwards owns (C) for clients
Edwards owns (WFC) for clients
Edwards owns (MS) for clients
Edwards owns (RIG) for clients
Edwards owns (NE) for clients
Edwards owns (SLB) for clients
Edwards owns (HAL) for clients
Edwards owns (DO) for clients
Edwards owns (VXX) for clients
Edwards owns (SPY) for clients
Edwards owns (QQQQ) for clients
Edwards owns (GLD) for clients
Edwards owns (ORA) for clients
Edwards owns (KFT) for clients
Barry Ritholtz|
Ritholtz Firm owns (C)
For Edward Mills
**no disclosures **
For Peter Boockvar
Boockvar owns Euros
For Brian Stutland
Stutland Equities makes a market in VIX and SPX options
