For Immediate Release
Chicago, IL- March 26, 2014 – Today, Zacks Investment Ideas feature highlights Features: Air France-KLM SA (AFLYY-Free Report), YRC Worldwide Inc. (YRCW-Free Report), Gafisa S.A. (GFA-Free Report) and China Zenix Auto Int'l (ZX-Free Report).
Cash Never Hurts: 4 Cash-Rich Stocks
A company hoarding ample cash does not do any good for your investment if it is burning through it only to fund operations. If the company doesn’t have the potential to earn sufficiently to refill its initial cash, the reserves could be ultimately exhausted.
To guard against that, first I required positive cash flow from operations. Then I looked for companies that are expected to be profitable in the current fiscal year. Here are the screening criteria that I added:
Operating Cash Flow > 0
Current Fiscal Year Consensus Estimate > 0
Eliminate Typical Cash Owners
Some businesses demand huge cash holding by their very nature. I eliminated companies from Finance and Medical sectors as these tend to have a lot of cash on hand for the nature of their businesses. Cash is the basic operating asset for finance companies while medical companies keep cash in hand to fund their R&D.
Screening Criteria: Sector <> Finance; Sector <> Medical
Ensure Favorable Zacks Rank
Good market or bad, stocks with a favorable Zacks Rank http://www.zacks.com/education/stock-education generally outperform. Zacks Rank #1 (Strong Buy) and #2 (Buy) stocks, which have a proven history of success, have actually witnessed positive earnings estimate revisions over the past few weeks.
(See the performance of Zacks' portfolios and strategies here: About Zacks Performance).
Screening Criterion: Zacks Rank <= 2
How Successful the Strategy Is
For examining how profitable this screen would have been in the past, I backtested it with a 24-week holding period over the last 10 years. I found that the group of stocks matching these parameters significantly outperformed the S&P 500.
4 Cash-Rich Stocks to Buy Now
I came up with the following 4 stocks, all of which hold a Zacks Rank #2:
Air France-KLM SA (AFLYY-Free Report): Headquartered in in Paris, France, the company provides passenger transportation services on scheduled flights.
Cash and Marketable Securities/Market Capitalization = 1.42
Operating Cash Flow (million) = $1,824
Current Fiscal Year Consensus Estimate = $0.88
YRC Worldwide Inc. (YRCW-Free Report): This Overland Park, Kansas-based trucking company provides various transportation services primarily in North America.
Cash and Marketable Securities/Market Capitalization = 1.10
Operating Cash Flow ($million) = $98
Current Fiscal Year Consensus Estimate = $0.21
Gafisa S.A. (GFA-Free Report): Headquartered in Sao Paulo, Brazil, the company is engaged in the development of residential buildings.
Cash and Marketable Securities/Market Capitalization = 1.56
Operating Cash Flow ($million) = $448
Current Fiscal Year Consensus Estimate = $0.17
China Zenix Auto Int'l (ZX-Free Report): This Chinese investment holding company produces tubed steel wheels, tubeless steel wheels, off-road steel wheels and wheel components for commercial vehicles. It directly sells its products in China and exports them to India and 30 other countries.
Cash and Marketable Securities/Market Capitalization = 1.25
Operating Cash Flow ($million) = $79
Current Fiscal Year Consensus Estimate = $1.03
This screen is just a starting point for your research. However, safety is the name of the game in investing. No matter the health of the stock market, real cash-rich stocks are always safe.
Cash is king, so don’t ignore it.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.