8 Companies with a Ton of Cash - Investment Ideas

It's no secret that corporations are sitting on huge piles of cash these days. In fact, companies have close to $2 trillion in cash and other liquid assets on their books.

It's understandable that companies are a little gun-shy after the recent economic downturn. As the economy improves, however, the issue becomes:

What do these businesses do with all that dough?

That's not a bad problem to have.

Companies with lots of cash are in better positions to make acquisitions or grow organically. They rarely have to go to the costly debt or equity markets in order to fund their growth. If they do, investors will require much lower rates of return than if the company was cash-strapped. This puts the more stable company in a better position to capitalize on various opportunities that can arise.

Secondly, companies with plenty of cash can reward shareholders through stock buybacks or dividend payments. This is especially true of mature companies. Larger companies have fewer growth prospects, so it makes sense to return an increasingly large portion of earnings to shareholders.

Think about Microsoft (MSFT) in the 1990s compared to the 2000s. The company grew tremendously for several years, but inevitably that growth slowed. Now the company rakes in the dough and pays out a decent amount to its shareholders. It began paying a dividend in 2003 and paid a special $3.00 per share dividend in 2004.

Wal-Mart (WMT) is the same way. Although sales have grown at a compound annual growth rate of 7.8% since 2000, the retail giant has increased its dividend at a 17.6% annual clip.

Finally, it allows companies to survive the downturns. Savvy companies, just like savvy households, keep some cash on hand as a safety net in case of an emergency. Companies with a defensive cash position and little or no debt survived the Great Recession, while many without a cushion did not. That means additional market share for the surviving firms.

Although companies may not be earning much of a return sitting on so much cash, they're in a great position to make some smart acquisitions, pay out a juicy dividend, or survive an Armageddon-like downturn.

Here are 8 companies with lots of cash, little or no debt, and a Zacks #1 (Strong Buy) or #2 (Buy) ranking:

1. Bed Bath & Beyond (BBBY)

Total Cash and Marketable Securities as a Percentage of Total Assets: 25.9%
Debt to Total Assets: 0%
Zacks Rank: #1 (Strong Buy)

Debt-laden competitor Linens 'n Things went under in 2008 while the conservative Bed Bath & Beyond survived. Now BBBY is taking its market share.

2. Baidu (BIDU)

Total Cash and Marketable Securities as a Percentage of Total Assets: 74.9%
Debt to Total Assets: 0%
Zacks Rank: #2 (Buy)

The Google of China has a remarkable 41.6% net margin.

3. Expeditors International (EXPD)

Total Cash and Marketable Securities as a Percentage of Total Assets: 39.0%
Debt to Total Assets: 0%
Zacks Rank: #2 (Buy)

The third-party logistics firm doesn't have large capital expenditures like the companies it advises. That way, it gets to keep most of the cash it generates from operations.

4. Autodesk (ADSK)

Total Cash and Marketable Securities as a Percentage of Total Assets: 44.1%
Debt to Total Assets: 0%
Zacks Rank: #2 (Buy)

Earnings per share are expected to grow 77% in 2011 and 30% in 2012.

5. Adobe Systems (ADBE)

Total Cash and Marketable Securities as a Percentage of Total Assets: 30.3%
Debt to Total Assets: 18.6%
Zacks Rank: #2 (Buy)

The company spent over $700 million buying back stock in 2010. Could a dividend finally be on the horizon in 2011?

6. Sandisk (SNDK)

Total Cash and Marketable Securities as a Percentage of Total Assets: 35.8%
Debt to Total Assets: 20.8%
Zacks Rank: #2 (Buy)

The flash memory storage company has a PEG ratio below 1.0.

7. Accenture (ACN)

Total Cash and Marketable Securities as a Percentage of Total Assets: 32.4%
Debt to Total Assets: 0%
Zacks Rank: #2 (Buy)

The rock solid management consulting and technology services company spent more than $1.6 billion last year buying back stock. It also pays a dividend that yields 1.8%.

8. Oracle (ORCL)

Total Cash and Marketable Securities as a Percentage of Total Assets: 36.9%
Debt to Total Assets: 45.2%
Zacks Rank: #1 (Strong Buy)

Although Oracle has almost $15 billion in debt, much of it is at interest rates below 5.5%.

Conclusion

These 8 companies have piled up a mountain of cash. Now the question becomes what to do with it.

That's not a bad problem to have.

Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.

 
ACCENTURE PLC (ACN): Free Stock Analysis Report
 
ADOBE SYSTEMS (ADBE): Free Stock Analysis Report
 
AUTODESK INC (ADSK): Free Stock Analysis Report
 
BED BATH&BEYOND (BBBY): Free Stock Analysis Report
 
BAIDU INC (BIDU): Free Stock Analysis Report
 
EXPEDITORS INTL (EXPD): Free Stock Analysis Report
 
ORACLE CORP (ORCL): Free Stock Analysis Report
 
SANDISK CORP (SNDK): Free Stock Analysis Report
 
Zacks Investment Research