Being short of cash is never a good thing and it can certainly be embarrassing. For corporations, having cash on hand can be critical, especially given that the banks are still being awfully stingy with their credit.
Looking for cash-rich companies is an investment strategy that is important not only for the defensive position offered by having money in the bank, but it can also set the stage for increased dividends, stock buybacks and growth.
But there are risks even with cash-rich companies – executives can spend the cash on a transformative deal you might not like, it could lead to a degree of complacency and, in event of a takeover, cash held is often worth less than 100 cents on the dollar to the acquirer.
Today's screen
Let’s look for companies on the Toronto Stock Exchange that are generating money.
The “net cash per share” screen is just one tool used by value investors looking for investment opportunities in companies whose shares have sometimes been under sustained selling pressure.
The formula for net cash per share is the total value of all cash and equivalents less the total of the short- and long-term liabilities divided by the shares outstanding. The net cash per share is then expressed as a percentage of the current price.
What we found
Only one had “net cash” higher than the share price – investment company Onex Corp. OCX-T Fairfax Financial Holdings Ltd. FFH-T came close, with its net cash per share coming in at 91 per cent of its share price.
