| Earlier this year, I read a news story about how | | | | So here we go: • I first looked for |
| Bernanke and Greenspan were both saying that | | | | companies with Cash and Marketable Securities |
| many companies had lots of cash on the books. | | | | that are higher now than they were last year at |
| They also said that businesses were in better | | | | this time. Having a strong Cash position means |
| shape now than they were during the last two | | | | companies will not have to depend on banks to |
| economic contractions. | | | | finance their operations, especially in this tight |
| The article was quick to point out that they were | | | | credit market. |
| excluding Financial Companies. But they also made | | | | • I also want the Debt to Total Capital |
| it a point to say that many companies across the | | | | to be less than the 5 Year Average Debt to |
| rest of the industries (from Cisco (CSCO) to | | | | Total Capital. Companies able to reduce their debt |
| Coca-Cola Co. (KO) to use their example) have | | | | positions from their historical ratios is a sign of |
| 'socked away' cash, reduced their debt and cut | | | | strength and a healthy balance sheet. |
| inventories. | | | | • I want the Cash Flow to be greater |
| Granted, a lot has changed since the beginning of | | | | than the Cash Flow from Last year. This too is a |
| the year - but we got a chance to see just how | | | | sign of financial health. |
| much money some companies have on hand this | | | | • I also want to see Inventories below |
| week when Microsoft (MSFT) announced a $40 | | | | last year's levels. Turnover of inventory (raw |
| billion stock buy-back plan. Nike (NKE) followed suit | | | | materials, unfinished goods and finished goods) is a |
| and announced a $5 billion repurchase program. | | | | primary way a company makes money. High |
| And then Hewlett-Packard (HPQ) did the same | | | | levels of inventory for long periods of time is |
| with their own $8 billion dollar buy-back program. | | | | usually not good sign. |
| (This is HPQs third buy-back program in two | | | | • I also want the stocks to show Annual |
| years.) | | | | EPS Growth Rates that are greater than the |
| So all that being said, I decided to put together a | | | | Median for their respective Industries. This lets us |
| screen that looks for companies with solid cash | | | | focus on the top half of the companies in their |
| positions. | | | | peer group. |
| Let me note that I'm not doing this in hopes that | | | | • Lastly, I want Next Year's EPS Growth |
| these companies initiate repurchase programs of | | | | Rate to be better than last year. |
| their own, even though that could be a benefit. | | | | Companies expecting growth in this current |
| I'm doing this because, as the credit market | | | | economy are the ones to favor. And all of the |
| tightens, the companies with the strongest cash | | | | above criteria are applied to stocks trading at or |
| positions, coupled with low debt, reduced | | | | above $5 and have an average daily trade |
| inventories and the like, will be in the best position | | | | volume of at least 50,000 shares or more. Here |
| to weather a financial crisis. | | | | are a few stocks from that list for Tuesday, 9 |
| And today's eye-popping numbers made me think | | | | 23/08: AYI Acuity Brands, Inc. DMND Diamond |
| that in spite of all the turmoil we've seen in the | | | | Foods, Inc. DV DeVry, Inc. LVB Steinway Musical |
| stock market, some companies should do just | | | | Instruments, Inc. SEAC SeaChange International, |
| fine due to their healthy balance sheets. | | | | Inc. |