Stockpickr: Top Stocks With Tons of Cash

Cash is king. There's nothing better than buying stocks that are generating a ton of cash every quarter, with cash flows increasing. When a company is generating reams of cash, it can use it to buy back stock, reduce debt, build business and so on.

At Stockpickr, we keep track of the top free cash flow-generating companies. We identify these companies, but we also specifically track the companies that have the best funds and investors as shareholders, giving us comfort that strong investors share our belief that the companies are going to continue their strong cash flows.

UTStarcom's(UTSI Quote) cash flows over the past 12 months were $436 million. The telecom-equipment company also has net cash on the books of about $250 million and an enterprise value of just $918 million. The fact it trades at such a small multiple over cash flows makes it an excellent takeover target. Last week, I mentioned that I suspect super hedge fund Renaissance Technologies is buying up stock in companies with a lot of cash in the bank and strong cash flows. In fact, Renaissance owns 6.5% of UTStarcom.

Why is UTStarcom so cheap? For one thing, its biggest driver of revenue, the broadband division, has experienced declining revenue. Margins were slimmer on this particular business, so company margins have gone up as a result. Additionally, the company has been caught up in the options-backdating scandal, and the CEO has received a Wells notice. Despite this, and despite the CEO's initially expressed desire to retire at the end of 2006, the board has asked him to stay on.