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TheStreet Open House

5 Cash-Burning Stocks to Extinguish From Your Portfolio

BALTIMORE (Stockpickr) -- When it comes to cash, a handful of stocks are shouting "burn, baby, burn." If you own any of these names, I'd recommend pulling out the fire extinguisher for your portfolio.

There are few red flags as bright and glowing as a high cash burn rate. I know the saying is overused, but cash truly is king. That's why firms burning through cash at a fast pace are sending a big message to investors -- one that they often don't want to send. Maybe more importantly, it's a message that investors won't get by turning to the usual metrics like earnings.

I realize that seems surprising, but there's a good reason why cash offers so much more transparency.

>>5 Stocks Ready to Get Squeezed Higher

You see, there's a difference between "profits" (the GAAP accounting definition used in financial filings with the SEC) and the amount of cash that a firm takes in. While firms can use a myriad of accounting loopholes to book big profits without seeing a cent, they can't claim cash unless they've got it on hand. Cash is also one of the most easily verified assets for auditors to check on -- and the one they typically hit first.

That combination of limited flexibility and high levels of assurance make cash an important number for investors to watch. And that's especially true when it's pouring out of corporate coffers.

>>5 Stocks Under $10 Poised for Breakouts

Firms burning cash -- that is, companies that are depleting their cash reserves -- are ticking time bombs. They've got a limited amount of time until they're forced to raise money by either a pricey debt offering, or a dilutive equity or asset sale. For that reason, it makes sense to unload any names that are burning through cash at an alarming rate.

Today, we'll take a look at five firms that fit that description.

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