Three Tickers to Play the Cash Boom

Andy Snyder|April 26, 2021

Cash is trash.

That’s the motto throughout much of the financial world these days.

When asset prices are soaring, inflation is knocking at the door and central bank printing presses are running at full speed… cash is a losing asset.

Try telling that to the corporate world.

It’s sitting on more than $10 trillion in liquid cash… the most in history.

It has created quite an opportunity for the folks who know how to sniff out a good deal.

Scanning for Gold

As you can guess, big businesses have a different set of guidelines to follow when it comes to dealing with their cash.

They’ve got shareholders to contend with. They’ve got a board that directs things and keeps the strategy in line.

Whereas Johnny Consumer can quickly spread his cash around (new computer, real estate, stocks, etc.), most companies cannot.

In an anemic economy like we’ve seen over the last decade, growth opportunities are scarce. Rising asset prices make acquisitions risky. And political uncertainty has a lot of decision makers sitting on their hands.

But eventually that cash will get spent in a way that boosts a company’s bottom line or get shipped out to shareholders.

In other words, the mountain of cash that’s been building over the last decade has savvy investors starting to drool.

With that in mind, we ran a screen this morning.

We searched for the companies with the biggest piles of cash and the smallest piles of IOUs.

For that last part, we specifically measured a company’s debt-to-equity ratio. It’s one of the best ways to measure a company’s overall risk tolerance. The higher the figure, the more leverage it’s using.

Of course, banks dominated the list of two dozen or so stocks that matched our curious query. They’re bound by rules that limit their debt.

Filtering them out, we found three nonfinancials that may be worth your attention.

You’ve surely heard of at least two of them.

Cash Power

Honda Motor Co. (HMC) has amassed quite a stockpile of cash… more than $25 billion.

With Honda’s total valuation of just over $50 billion, its cash stockpile clearly isn’t getting a full billing from Wall Street. Normally, we’d associate such a gap with a high debt load.

But we dug into the numbers.

Honda could hardly be considered burdened with debt. Pushing all other factors aside, it could pay off its debt today with its cash.

It would be a devastating move (that debt is virtually free these days), but it gives us a glimpse of what sort of power lies within the company’s cash coffers.

Surely Honda’s on the prowl for a good opportunity. And with the evolution happening in the auto industry these days, it could come fast.

A Value With a Catalyst

The second company on our list is Nokia (NOK).

With $1.45 worth of cash in the bank for every share of the $4 stock, the company is quite cash heavy.

All told, it’s got $8 billion at its disposal.

Its debt-to-equity ratio stands at just a bit more than 50 – a number that doesn’t mean a whole lot until we look at the competition.

Apple (AAPL) has a ratio of 170, while Qualcomm (QCOM) comes in at more than 210.

Compared with that duo, Nokia is quite conservative.

For investors looking for a good bargain, it’s a sign the market may have shaved a bit too much off of Nokia’s price.

Perhaps we’ll find out when the company opens its books next Thursday.

A Dollar Deal

Finally, we come to a bit of an oddball… Posco (PKX), a South Korean steelmaker.

It’s got $16 billion in cash and a debt-to-equity ratio of 45. For some context, competitor United States Steel (X) has just $2 billion in cash and a ratio of more than 130.

But here’s what’s most interesting.

Posco’s revenues are largely in the Korean won… but its debt is in dollars.

It makes the company’s cash stockpile a major currency play and a very interesting emerging market idea.

Bottom line… if you’ve got a pile of cash you’re yearning to put to use, give these three cash-rich companies a look.

And, Reader Steve, stop saying we never give you any ticker symbols.