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Stockpickr) -- Cash is still king in 2013 -- I bet you haven't heard that phrase in a while!
But it's true. Cash still matters, even in a market that's up 15% year-to-date -- and even in an interest rate environment where cash is cheap to borrow. You don't have to take my word for it; over the last decade, the top tier of cash-rich stocks worldwide generated total returns of 297%.
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S&P 500's performance over that same time period. And it includes the biggest drawdown in most investors' lifetimes.
Part of that stellar outperformance has to do with what cash enables companies to do. Capital gains are great, but historically speaking, the majority of portfolio growth comes from other sources. Dividends, share buybacks, and debt repurchases all inject value directly into your shares, and on a year-to-year basis, they also account for around 50% of annual stock performance. Only companies with cash that have the wherewithal to boost those payouts on command.
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In short, cash provides options. Firms with cash can opt to increase shareholder value by paying a dividend or initiating a share buyback. Plus, they have the ability to take advantage of pricey M&A opportunities and internal investments.
Lots of companies have big cash positions right now. In fact, more than 20% of the S&P 500's valuation is made up of the record cash holdings on corporate balance sheets. That means that it pays to be a little more selective with which companies you consider cash-rich.
To do that, we'll focus on firms that fit the tight set of quantitative criteria that beat the S&P by a factor of three. Today, we'll take a look
at five of them.
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