3 More Kings of Cash

Welcome back to the world of the Cash Kings, where we highlight businesses that generate a healthy dose of free cash flow. Why is cash flow so important? Because it gives management the opportunity to boost shareholder value through actions such as:

1. Paying dynasty-building dividends.  

2. Buying back shares at attractive prices.

3. Growing the business organically without having to borrow money or sell shares. 

A Fool's guide to free cash
Investing, after all, is about putting money up front today to get more of it in return tomorrow. Here at the Fool, we're firm believers that free cash flow, as opposed to traditional accounting earnings, is the best gauge of a firm's health and profitability -- or lack thereof.

So, with these cash flow lessons deeply ingrained in your Foolish subconscious -- or maybe just bookmarked as a "favorites" page -- I'll highlight three more cash-flow rulers of our Motley Fool CAPS kingdom.

Unlike UTEK (AMEX:UTK), a cash-burning company that CAPS members overwhelmingly dislike, these are businesses with free cash flow-to-sales margins above 15% -- also known as the Cash King Margin -- that our community is pretty bullish about.

So, sound the trumpets! Here's another trio of Cash Kings from CAPS:

As always, don't consider these stocks as formal picks but rather as suggestions worth further investigation. After all, due diligence is the Fool's way to riches.

But just for starters, here's a quick summary of these cash-throwing kings, and what some of their loyal CAPS followers think about them.

Beverage baron            
With an impressive free cash flow-to-sales margin of more than 25%, American Beverage, a.k.a. AmBev, takes the honors as this week's most prolific cash king.

As the leading supplier to the Brazilian beer market, AmBev has the dominant market share (roughly 70%), a virtually impenetrable distribution system, and world-recognized brands such as Stella Artois and Beck's to keep its kegs flush with cash. And as a major PepsiCo (NYSE:PEP) bottler, AmBev owns a solid portfolio of nonalcoholic products, too.

CAPS All-Star NetscribeConsumerGoods uses a top-down approach to go bottoms-up:

Brazilian GDP is expected to grow by 4% till 2010, which should lead to increased consumer spending power. As a result, volume sales of premium lager are expected to grow nearly 200% by 2010. This bodes well for AmBev, which derives 55% of its total revenue from beer sold in Brazilian market. ... With strong financials and a promising future, investors should celebrate with an AmBev.

Getty the great
The next monarch on our list is Getty Images, distributor of the world's best and broadest imagery collection. For the past several years, Getty has leveraged its massive photography network -- serving an average of 3.2 billion thumbnails, 4 million unique users, and 175 million page views each month -- to generate healthy cash flows for its shareholders.

CAPS All-Star weintweg explains the network effects that are keeping Getty's competitive picture sharp:

Getty Images is a strong company with an economic moat that is available at a good price. It is one of the first places that advertising agencies turn to when they need images. Getty will be very hard to displace from its perch. Because it is so dominant, it is also one of the first places that photographers turn to when they want to sell photos. It has a good distribution model.

Air to the throne
Our last free cash flow ruler this week is Motley Fool Global Gains selection Grupo Aeroportuario del Centro Norte, a Mexican airport operator serving busy Monterrey, three vacation destinations -- Acapulco, Mazatlan, and Zihuatanejo -- and nine other regional hubs. OMA is up 27% since the pick was made last February, and as Foolish colleague Seth Jayson notes, the company's expansion plans should fuel plenty of outsized returns going forward. 

OMA's monopoly-like fixed cost structure, its presence in major centers, and the rapid growth of the Mexican airport market are what drive the cash flow for this king.

CAPS All-Star NetscribeTransportation gives us an analytical point of departure:

Intense air and passenger at Mexico City International Airport has [created] additional hubs outside Mexico City, which creates a good opportunity for Monterrey Airport, maintained by the company. ... This stock is attracting investors' attention, as passenger growth is [a] key revenue driver, and ... domestic traffic is poised to benefit the most from the ongoing industry developments.

The Foolish bottom line
Free cash flow-generating companies such as American Beverage, Getty Images, and Grupo Aeroportuario are always among my top candidates to research further. Our Motley Fool CAPS intelligence database is a great place to look for your own Cash Kings or read how your fellow Fools feel about thousands of different stocks.

Join the forward-thinking CAPS community, free of charge. And be sure to join us next time, when I'll feature three more cash kings from CAPS. Until then, may your cash flow reign supreme.   

For even more great investing ideas, you can also check out any of our Foolish newsletter services free for 30 days.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Fool's disclosure policy is the strict set of rules that always rule Fools.