ScreenShot: Companies That Are Ready for Rainy Days

Like squirrels that hoard acorns for the coming winter, many companies have chosen to build up cash in the event of an economic slowdown or a market downdraft. You would think that conservative approach would be rewarded in this environment, but shares of these companies have been punished just as much as those that failed to plan for just such a rainy day.

But these are precisely the types of companies you want to own in this environment. The large cash balances allow them to prove their staying power to customers -- a key selling point when bidding against rivals that may run into financial trouble in a deepening slowdown.

A hefty cash stash can also be used to buy back stock and aggressively reduce share count, especially when that stock is at multiyear lows. Lastly, high cash balances give a company the flexibility to either acquire rivals or more aggressively invest in R&D while peers are backpedaling.

We ran a screen to find companies that have net cash (cash less debt) that is equal to at least 25% of the company's market value. Not surprisingly, tech companies dominate the list, as tech CFOs tend to hoard cash in this cyclical business. On the table below, note that eight of the 16 names on the list are in the tech sector.

Stashing the Cash
Company	Ticker	Net Cash ($m)	Market Cap. ($m)	Cash/ Mkt. Cap.
Abraxis Bioscience	ABII	666	2,546	26%
Broadcom 	BRCM	2,042	7,533	27%
Dell 	DELL	7,913	26,438	30%
Foster Wheeler 	FWLT	1,571	4,003	39%
Franklin Resources	BEN	5,099	15,499	33%
Health Net	HNT	1,588	1,910	83%
IAC/InterActive	IACI	1,193	2,068	58%
KBR	KBR	1,858	2,506	74%
Lam Research	LRCX	753	2,900	26%
McDermott Int'l	MDR	1,391	4,062	34%
Motorola	MOT	4,432	11,825	37%
NVR	NVR	801	2,975	27%
Red Hat	RHT	779	2,803	28%
SanDisk	SNDK	2,608	4,034	65%
Sun Microsystems	JAVA	2,045	4,217	48%
Boeing	BA	9,602	35,310	27%
Source: Thomson Reuters

With some of these stocks, the market has clearly overshot the mark, as net cash balances at KBR (KBR - commentary - Cramer's Take), SanDisk (SNDK - commentary - Cramer's Take) and HealthNet (HNT - commentary - Cramer's Take) represent more than 65% of their market value.

HealthNet serves as a prime example of why you need to dig deeper when analyzing companies on a screen. The company appears to have more than $1.5 billion in net cash, compared with a market value of less than $2 billion. Trouble is, many of the investments on the balance sheet are in beleaguered financial institutions.

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David Sterman has been an equity analyst and financial journalist for 15 years, most recently serving as Director of Research at Jesup & Lamont Securities.