Five Cash-Rich Companies Worth a Look

Having cash on the balance sheet is one of the attributes of an attractive investment opportunity in today's environment. Not only does it provide a safety net for the company to fall back on in hard times, but the best defense is usually the best offense. Having cash on hand allows a company to make strategic acquisitions during tough times, on the cheap.

It's often the case that companies trading near cash value are expected to turn a loss during the near future. Not only does that provide a good buying opportunity for the long-term investor, but the stocks listed below are actually expected to turn a positive EPS over the next 12 months.

The following is a list of five stocks that have about half of their market cap in cash. Additionally, many have zero long-term debt:

Company	Symbol	Market Cap	Recent Price	Cash/Share	Price/Cash Ratio
The9 Limited	NCTY	$376 million	$13.75	$7.54	1.82
Focus Media	FMCN	$987 million	$6.63	$2.90	2.29
Harvest Natural	HNR	$145 million	$3.48	$3.59	0.97
FreightCar America	RAIL	$174 million	$18.16	$10.93	1.66
Administaff	ASF	$478 million	$22.37	$10.04	2.23

The9 Limited (NCTY)

The9 Limited is an online game operator and developer in China. The9 Ltd. has a market cap of $376 million; its shares were traded at around $13.75 with a P/E ratio of 7.1 and P/S ratio of 1.4. The dividend yield of The9 Ltd. stocks is 15.8%.

Focus Media (FMCN)

Focus Media operates the largest out-of-home advertising network in China using audiovisual plat-panel displays based on the number of locations and number of displays in its network. Focus Media Holding Ltd. has a market cap of $987 million; its shares were traded at around $6.63 with a P/E ratio of 4.7 and P/S ratio of 2.3.

Harvest Natural (HNR)

Harvest Natural Resources Inc. is an independent oil and gas exploration and development company with principal operations in Venezuela and Russia. Harvest Natural Resources Inc. has a market cap of $145 million; its shares were traded at around $3.48 with a P/E ratio of 17.5 and P/S ratio of 10.2

FreightCar America (RAIL)

FreightCar America Inc. manufactures railroad freight cars with particular expertise in coal-carrying railcars. In addition to coal cars, FreightCar America designs and builds flat cars, mill gondola cars, intermodal cars, coil steel cars, and motor vehicle carriers. FreightCar America Inc. has a market cap of $174 million; its shares were traded at around $18.16 with a P/E ratio of 11.7 and P/S ratio of 0.3. The dividend yield of FreightCar America Inc. stocks is 1.4%.

Administaff (ASF)

Administaff is a personnel management company that serves as a full-service human resources department for small and medium-sized businesses throughout the United States. Administaff Inc. has a market cap of $478 million; its shares were traded at around $22.37 with a P/E ratio of 12.4 and P/S ratio of 0.3. The dividend yield of Administaff Inc. stocks is 2.3%. Administaff Inc. had an annual average earning growth of 21.2% over the past 10 years.

Although many stocks have been knocked down near cash value for a reason, these companies have strong businesses and should turn a profit in 2009. As Ben Graham suggested, holding a basket of stocks such as these could help your portfolio achieve long-term success.

Disclosure: None

Comments

[Rex T:]

It gets even better for FMCN. SINA is in the process of acquiring them. With the current structure, you can obtain the SINA shares at a 40% discount if you buy FMCN.
Cheers!

Apr 09 03:57 PM

[tilut:]

FMCN and NCTY are just given away . Time to buy them.

Apr 09 05:37 PM

[Bharper:]

BBSI is another staffing firm, I believe they are selling around $10 and have $5.50/shr in cash

Apr 09 10:01 PM

[yellowhoard:]

Check out CYNO. Cynosure makes all of those vanity laser systems that remove wrinkles and fat. They have cash of $90m and a market cap around $80m. If you could buy em out under 7, you could sell off the patents to the competition and pocket the cash difference.

If the economy turns around, this one will double in a hurry.

Apr 10 01:58 AM

[LoveShorting:]

Thanks, Rex. Did not know about the SINA deal.
Disclosure: Long FMCN because I bought it much higher last year & it has low % insider ownership, key for Chinese equities.

Apr 10 08:53 AM

[Alan Brochs...:]

ASF cash is misleading, as is offset by two accruals (liabilities): Payroll taxes/deductions payable and payroll for its customers. These iems are prepaid by customers (cash) then dispersed. The total is $253mm. The net difference between all current assets and liabilities is just $75mm. When I am looking for "cash rich" companies, I try to find ones not encumbered by these large short-term liabilities. Your other names don't share this issue.

Apr 10 11:18 AM

[Ryan Vanzo:]

Rex & LoveShorting: Although I am more of a long-term investor, FMCN could be a great trade for the short-term as well as long-term. In this environment, stocks that are being involved in mergers/buyouts usually have their downsides limited because although there will be room for risk arbitrage, they usually don't stray too far from their buyout price.

BHarper: I love BBSI, it happens to be a Motley Fool pick as well. Short-term, things could get volatile, long-term, I think it's a winner.

Alan: Thanks for your input yet again. Although ASF does have considerable liabilities, I think these liabilities have been priced in already and shouldn't be much of a problem, but I think there are stocks that don't have these problems, such as the other stocks I have listed.

Apr 10 01:06 PM

[Alan Brochs...:]

I have ASF in both of my model portfolio. While I don't believe that it's cash position is as good as it looks, the balance sheet is still strong and the valuation ok. The problem is that they are facing some big headwinds. I listened to the call earlier this year, and they THINK they are being conservative. I sure hope so!


On Apr 10 01:06 PM Ryan Vanzo wrote:

> Rex & LoveShorting: Although I am more of a long-term investor,
> FMCN could be a great trade for the short-term as well as long-term.
> In this environment, stocks that are being involved in mergers/buyouts
> usually have their downsides limited because although there will
> be room for risk arbitrage, they usually don't stray too far from
> their buyout price.
>
> BHarper: I love BBSI, it happens to be a Motley Fool pick as well.
> Short-term, things could get volatile, long-term, I think it's a
> winner.
>
> Alan: Thanks for your input yet again. Although ASF does have considerable
> liabilities, I think these liabilities have been priced in already
> and shouldn't be much of a problem, but I think there are stocks
> that don't have these problems, such as the other stocks I have listed.

Apr 10 03:46 PM

[kagame:]

Anyone have any insight as to why FMCN isnt trading at the $10 a share it is worth in SINA shares alone, not even to count the stub FMCN company that will remain in existence with 50% of the companies assets and a quarter to a third of its revenue?

Even if there is a 25% risk of the merger not going through I would think that FMCN should trade at or near $10.

Apr 10 05:09 PM

[Violent Cap...:]

FMCN/SINA is a nice merger arbitrage trade, but it wouldn't it be nicer to bump that figure up to an 85% return?

All the details below:

www.violentcapitalist....

Apr 15 04:03 PM

[Violent Cap...:]

Probably for any reason or a combination of the following:

1) investors are concerned about lower ROIs in the Chinese advertising market
2) people don't understand the deal or have not been paying attention (it's not well publicized)
3) FMCN wanted to buy a foot massaging company or something 1-2 months back (wtf?)
4) FMCN will be cash flow negative post sale and will have nothing to prevent the stock from trading at $1-2/share post sale

Nevertheless, doesnt mean you cant earn arbitrage profits of 85% or more! Check out my blogs or my website!


On Apr 10 05:09 PM kagame wrote:

> Anyone have any insight as to why FMCN isnt trading at the $10 a
> share it is worth in SINA shares alone, not even to count the stub
> FMCN company that will remain in existence with 50% of the companies
> assets and a quarter to a third of its revenue?
>
> Even if there is a 25% risk of the merger not going through I would
> think that FMCN should trade at or near $10.

Apr 15 05:36 PM

[momentum74:]

FMCN is getting takeover chatter in addition too SINA . Huge investor has purchased 28 % of FMCN and could be buying more.
www.tradethenews.com/s...
35 % of FMCN float is short that could give a monster shortsqueeze imo
shortsqueeze.com/?symb...

Apr 16 12:05 AM