5 Cash-Rich Companies Being Given Away

"I don't look to jump over seven-foot bars: I look around for one-foot bars that I can step over." 
-- Warren Buffett

If you're in the market for those one-foot bars Buffett loves, here's one of the best places to look: companies beaten to such a pulp that just their net amount of cash on hand represents a significant portion of the share price. In some cases, you're being handed the actual business operations for free -- or at least, close to it. Doesn't get much better than that, does it?

Using our Motley Fool CAPS screening tool, I searched for companies fitting these bargain-basement criteria:

  • Estimates of profitability in 2009.
  • No long-term debt.
  • A high level of total cash in relation to current share price.

Pretty simple, eh? Among other candidates, I came across these five:

Company

Market Cap

Recent Price

Total Cash per Share

2009 EPS Estimates

CAPS Rating   
(5 stars max.)

eBay (Nasdaq: EBAY  )

$16.9 billion

$13.26

$2.85

$1.62

***

Focus Media (Nasdaq: FMCN  )

$1.03 billion

$7.98

$2.89

$1.61

****

Heidrick & Struggles (Nasdaq: HSII  )

$310.9 million

$19.01

$11.19

$0.77

***

Korn Ferry (NYSE: KFY  )

$475.6 million

$10.63

$4.50

$0.83

***

NamTai Electronics (NYSE: NTE  )

$248.6 million

$5.55

$5.59

$0.12

*****

Sources: Data from Motley Fool CAPS, Yahoo! Finance, as of Jan. 19. TTM= trailing 12 months.

You can run the same screen yourself, if you like. None of these are formal buy recommendations -- just a good starting point for more research.

Is this supposed to happen?
Rarely in an investor's life do such extreme opportunities arise. Lucky you, this appears to be one of 'em. Nam Tai Electronics is being given away for free. Gratis. Complimentary. On the house. You want it? It's yours.

With shares at $5.55, not a hint of long-term debt, and $5.59 per share in cash, buying a share in Nam Tai is in essence paying nothing for the future earnings of this business -- a business that's been profitable every year since at least 1990.

Our CAPS community's buzzing about this insane valuation. As ImOuttaHere2008 wrote late last year, "Do my eyes decieve me or is this company profitable, trading at less than cash, and paying a 15% dividend?"

CAPS member foontok took it a step further, writing:

If the numbers are accurate, Nam Tai is a great value. It is selling well below book value of $7.737/share, has $5.59/share in cash, miniscule debt, and yield is 15.30%.Yes, sales have fallen, but lower priced handsets should sell well in the next few years. The share price has fallen way too [far] to ignore. I'm in.

To be sure, business has been and will be lackluster for a while, as global economies search for a bottom. Demand for Nam Tai's products -- which are low-margin by nature -- will likely wane from the spend-happy days of yesteryear. These woes aren't just plaguing Nam Tai; competitors such as Flextronics (Nasdaq: FLEX  ) and Jabil Circuit (NYSE: JBL  ) are trading like it's the end of the world, too. Add in Nam Tai's status as an international stock -- investors' favorite punching bag after the Satyam implosion -- and an extra layer of insecurity hangs overhead.

So yeah, while business might be anything but easy going forward, Nam Tai is the epitome of a company with all the bad news (and then some) already baked into the share price. Its balance sheet is as strong as you could ask for these days, and with shares trading at less than cash, any and all future income streams are basically icing on the cake. Provided management doesn't flush cash down the toilet, you're looking at a minimized downside without paying a penny for the upside.  

Panic of 2008, meet opportunity of 2009.

Take it away, Fool
Disagree? See it in another angle? Just want to see what the rest of the pack is saying? More than 125,000 investors use CAPS to share ideas and swap opinions. Click here to check it out. It won't cost you a dime.

For further Foolishness:

Motley Fool Stock Advisor is offering a special inauguration sale today! You can now get a 12-month membership to the Fool’s flagship investment service for only $99 – a more than 30% discount. Click here for full details.

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Nam Tai Electronics and Focus Media Holding are Motley Fool Global Gains picks. eBay is an Inside Value recommendation. Focus Media Holding is a Rule Breakers selection. eBay is a Stock Advisor recommendations, while Satyam is a former rec. The Motley Fool is investors writing for investors.


Read/Post Comments (1) | Recommend This Article (14)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 20, 2009, at 7:12 PM, Oldham22 wrote:

    Heidrick and Korn Ferry look good, but the reality is they have no product. Nobody is paying fees for executive search these days. There are too many good executives on the street to pay a firm several hundred thousand dollars to do the search. They are laying recruiters off because they don't have searches to execute, and they will have to dip into their cash just to keep the doors open. Heidrick's offices are in the most elite locations in the world: Sears Tower in Chicago; Grace Building in NYC; Sand Hill Road in Menlo Park; Paris, London, etc. Their overhead is astronomical for a professional services business.

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