Article on cash rich companiesInteresting read....
For these companies, 'cash is king'
ALLAN ROBINSON
June 4, 2008
WHAT ARE WE LOOKING FOR?
For individual investors, the common refrain "Cash is King" holds true in a plunging stock market.
Italso applies to companies. Looking for cash-rich companies is aninvestment strategy that is important not only for the defensiveposition offered by money in the bank especially in tough times, butalso because high cash balances can set the stage for growth.
But there are risks even with cash-rich companies, says WilliamAldridge, assistant portfolio manager with value investors HowsonTattersall Investment Counsel. Managements can spend the cash on atransformative deal you might not like, it can lead to a degree ofcomplacency and in event of a takeover, cash held is often worth lessthan 100 cents on the dollar to the acquirer, he said.
TODAY'S SCREEN
The net cash per share screen is a tool used by value investorslooking for investment opportunities of companies whose shares havesometimes been under sustained selling pressure.
The formula for "net cash per share" is the total value of all cashand equivalents less the total of short- and long-term liabilitiesdivided by the shares outstanding, according to Howson Tattersall. Thenet cash per share is then expressed as a percentage of the currentshare price.
It is a variation of yesterday's value-screening tool and anothertest of liquidity, the net working capital per share, which is based oncurrent assets less total liabilities, which includes both short- andlong-term debt.
WHAT WE FOUND
The list includes a dozen junior exploration companies looking forgold, uranium and other metals; biotechnology companies; and othercompanies with Internet applications. Enghouse Systems Ltd. developssoftware used in interactive voice response and for use in the designand management of complex infrastructures used in telecommunications,utilities, energy and transportation networks.
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SOURCE: BLOOMBERG AND GLOBE INVESTOR