BALTIMORE (Stockpickr) -- Believe it or not, cash is still king in 2014.
January's correction was a pretty jarring reminder that investors are a fickle bunch. They can go from feeling great about the bull market to feeling like the market is too "frothy" in a matter of market sessions. But owning companies with cash protects against a lot of downside risk -- it's like a fundamental backstop on shares.
Even better, owning cash-rich companies isn't a performance drag on your portfolio. In fact, it's a capital gains booster: 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. So yes, I mean it when I say cash is still king this year.
It's not hard to find either. With more than $1.25 trillion sitting on corporate balance sheets of S&P component stocks, U.S. companies have never held more cash on their books before on an absolute basis. And as a percentage of assets, cash has reached a level that's been unheard of since the 1970s. Around 25% of the S&P's current price tag is covered by cash in the bank.
The benefits of big cash holdings come from what they enable 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 lots of cash that have the wherewithal to boost those payouts on command.
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.
That's especially true in the tech sector, where firms have been hoarding cash at a rapid pace.
So today, we're taking a look at five firms that fit the tight set of quantitative criteria that beat the S&P by a factor of three.