5 Cash-Rich Companies at Bargain Prices

"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, I've got a good starting point: companies beaten to such a pulp that just their net amount of cash on hand represents a significant portion of the share price. On a few rare occasions, you're being handed the actual business operations for free -- or at least close to it.

Using the wisdom of our 130,000-investor-strong Motley Fool CAPS community, I went on a hunt for companies fitting these bargain-basement criteria. Specifically, I looked for:

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

Pretty straightforward. Among others, I came across these five:

Company

Market Cap

Recent Price

Total Cash per Share

2009 EPS Estimates

CAPS Rating
(5 stars max.)

Harvest Natural Resources
(NYSE: HNR  )

$114 million

$3.46

$2.95

$0.07

*****

True Religion
(Nasdaq: TRLG  )

$298 million

$11.67

$2.44

$1.76

**

Thor Industries
(NYSE: THO  )

$766 million

$13.83

$3.44

$0.46^

**

NetGear
(Nasdaq: NTGR  )

$369 million

$10.72

$5.90

$0.08

*****

Garmin
(Nasdaq: GRMN  )

$4.2 billion

$20.96

$3.53

$2.39

****

Data from Motley Fool CAPS and Yahoo! Finance, as of March 19, 2009. ^Fiscal year ending July 2010.

Want to see what panic looks like?
I'll show you what panic looks like: Check out Harvest Natural Resources. It's rebounded slightly in the past few weeks, but recently traded below its cash value -- and this is a company that doesn't hold a lick of debt, mind you. Think about that for a second and remind yourself how useful it can be to forget about the efficient-market hypothesis in times like these.

Oil prices have obviously been dreadful over the past six months, but that free fall seems to be putting in a bottom. With prices back firmly above $50 a barrel, it looks like the massive deleveraging and supply glut are slowly but surely stabilizing, which is great news for energy companies like Harvest.

Don't lose faith
If there's one industry you'd be wise to avoid like the plague in a recession like this, it's high-end discretionary retail. People are struggling to keep the lights on, let alone spend a week's paycheck on a pair of pants.

So why even think about a company like True Religion, maker of gazillion-dollar jeans? Quite simply, because it's cheap, incredibly well-capitalized, and consistently profitable. CAPS member FGunawan described these seemingly recession-proof strengths earlier this year, writing:

The only thing that is never out of fashion on Wall Street is solid financial performance. True Religion has religiously delivered good earnings over the years, is expected to continue its earning growth even with the headwind coming from difficult macroeconomic conditions. By now it has in its coffers significant cash to face near term challenges as well as to grow its business when conditions improve.

Buses? Really?
OK, I take it back: If there's one industry you should avoid right now, it's autos. General Motors (NYSE: GM  ) and Ford (NYSE: F  ) are sad examples of what happens when you take a discretionary, capital-intensive, debt-laden business and drop it in the middle of a Great Recession.

Then why even blink an eye at a company like RV and bus manufacturer Thor? Just like True Religion, this is a one-of-a-kind company that too often gets lumped in with its wayward peers. Here's how CAPS member joblinger described Thor's potential:

This is a well-run business, with no-nonsense managmenent. Right now this company is heavily exposed to consumer discretionary spending and a lack of ability for consumers to finance RVs. However the company also produces school buses as part of its revenue, and is sheltered from consumer spending somewhat as a result. Another good reason to bank on this as a long-term value purchase is a small counter-trend of people selling their houses and becoming entirely mobile. The sanctity of the permanent residence as ... your most valuable asset is a fantasy ballon that has been effectively popped. RVs will stay appealing over the next 5-10 and 20 years, the more mobile we, as a society become.

Your take it from here
What do you think about these three cash-rich bargains? Care to thrown in your two cents? More than 130,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate

For further Foolishness:

Fool contributor Morgan Housel owns shares of Harvest Natural Resources. Garmin is a Motley Fool Global Gains pick. NetGear is a Motley Fool Stock Advisor recommendation. The Motley Fool has a disclosure policy.


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