5 Stocks With a Cash Cushion

In Ovid's Fasti, the protagonist asks the god Janus why he favors cash above all the other gifts at his altar. The deity replies, "How little you know about the age you live in if you think that honey is sweeter than cash in hand."

In other words: Cash talks, and everything else walks.

Put the cash to work
Likewise, a company with a significant amount of cash on its balance sheet is attractive to investors in many ways. For instance, cash allows a company to:

• Improve its debt rating, thus reducing its cost of capital.
• Begin or increase dividend payments.
• Repurchase undervalued shares.
• Fund research and development projects, even in a down market.
• Make strategic acquisitions.

Too much cash, however, can be a bad thing, since it earns a minimal return and is thus a poor use of investor capital. And for better or worse, large amounts of cash on hand also make a company an attractive takeover target.

Let's make more bucks
To help us determine which cash-rich companies deserve our attention, we'll enlist the help of the 105,000 investors participating in Motley Fool CAPS and the new CAPS screening tool. Among other things, we'll look for companies with at least $5 per share in cash, a return on equity above 10%, and a four- or five-star CAPS rating.

Here are five of the results:

Data provided by Capital IQ, a division of Standard & Poor's, and Motley Fool CAPS as of May 30. Cash-per-share figures as of the company's most recent SEC filing using shares outstanding on filing date.

It's important to note that while each of the companies on this list is highly rated, they are offered here not as formal recommendations, but rather as starting points for further research.

Cash ain't trash
Now that we've narrowed the list to a handful of companies that Scrooge McDuck would be proud to back, let's see why CAPS investors have given these stocks top ratings.

Sigma Designs
In April, CAPS All-Star TheGarcipian weighed the pros and cons of Sigma, but in the end decided it had a more bullish than bearish appearance: 

The stock has been beaten up pretty good. To me, it looks like there's much more upside potential than downside loss. But I've been wrong before and will continue to be wrong, especially when trying to call a bottom and catch a falling knife... Still, like a moth to the flame, this one looks bright to me.

Foster Wheeler
A favorite of Jim Cramer, Foster Wheeler also enjoys the backing of CAPS' paats78, who sees good things down the road: 

They announced good earnings beat estimates by 12 cents per share. The stock got beat up due to the fact that the CEO shared a softness in the NA [North  American] market but this sector is about 10% of total revenue for the company. Their backlog has grown and they will continue to have earnings growth. [Definitely] a buy.

GameStop
Back in December, STA5248 argued that GameStop is a "monster investment," saying: "The financials looks [pristine], with growing revenues, profits, operating profits and solid management has put this company in the eyes of many investors. While consoles sales are up because of the 360, ps3 and Wii and their ever decreasing price and stronger sales, their real hefty profit margins come from the softwares and used games."

Boston Beer
In March, jfosu went to a well that we're familiar with here at the Fool, by applying Warren Buffett's investing axioms to an investment thesis: 

One of Warren Buffett's rules of investing is to go with companies that can get consumers to pay more just based on their name (ie coca cola). This is quickly becoming the case with Sam Adams. Over the past two years Sam Adams has increased production by 300% and has had a strong advertising presence on television. More and more people are becoming enamored with this company as it still has 'microbrew' taste but has a national presence.

Agrium
CAPS All-Star unvrsldeflation sees a correlation between oil and fertilizer: 

As oil runs up fertilizer will match it. This company is an integrated producer and seller. At first glance there doesn't appear to be a chink in its armor, unless it is the seed business where I have no idea if they produce or act as a middleman. Looks like this is a good international play.

What do you think about these stocks, or any other stocks, for that matter? Make your voice heard on Motley Fool CAPS, where more than 105,000 investors are waiting to hear what you have to say. CAPS is 100% free, so what are you waiting for?