BALTIMORE (Stockpickr) -- While most investors are jawing over the upcoming Twitter (TWTR) IPO, you can take some solace from knowing that the biggest gains come from something a little less exciting: cash.
That may seem like a strange combination. After all, cash is supposed to be a drag on your portfolio, not a performance booster.
But 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%. That's triple what the S&P 500 earned over the same period. Yes, cash is still king this year.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. >>5 Stocks Under $10 Set to Soar 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 25% 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. >>5 Stocks Insiders Love Right Now 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.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV