4 Profitable Companies Trading Near Cash

“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: small-cap companies beaten to such a pulp that their market value represents scarcely more than the net amount of cash on hand. The idea here is that you're essentially 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. Specifically, I looked for:

  • Market caps of less than $300 million -- if the company's big enough to attract large investors' attention and it's still this cheap, something's fishy.
  • No long-term debt.
  • Profitable over the past 12 months.
  • An extremely high level of cash in relation to current share price.

Among others, I came across these four:

Company

Market Cap

Recent Price

Total Cash

Long-Term Debt

Earnings (TTM)

CAPS Rating (out of 5)

Cogo Group (Nasdaq: COGO  )

$105 million

$3.00

$3.30

0

$0.49

****

 

Harvest Natural Resources (NYSE: HNR  )

$178 million

$5.40

$3.59

0

$1.65

****

Nam Tai Electronics (NYSE: NTE  )

$216 million

$4.80

$6.07

0

$1.38

*****

ChinaDigital TV (NYSE: STV  )

$258 million

$4.50

$3.83

0

$0.63

***

Data from Motley Fool CAPS as of Dec. 5. TTM= trailing 12 months.

None of these are formal buy recommendations -- just a good starting point for more research, and a strong indication that these companies might merit your attention.

Harvesting opportunity
Harvest Natural Resources has had a rough couple of years because of political squabbles in Venezuela, where the bulk of its operations reside. Those issues were hammered out in 2007, but now Harvest has a whole new headache to deal with: the never-ending plunge in the price of oil and gas.

Factor in the geopolitical risk inherent in Harvest's international assets and team it up with a spectacular commodity bust, and the market has decided this company is worth just a pittance more than its cash on hand -- pretty gloomy, eh? As CAPS member kkconway noted last week:

P/E is 3.27, down on Venezuelan asset losses, but WAY oversold, even if Venezuelan assets are lost. This is a steal at $5/share. Should be a three bagger if oil ever goes to $60/bbl again, and do you really doubt that it will get there again sooner than later?

It's a good point: Harvest was able to stick around Venezuela after Hugo Chavez gave companies like ConocoPhillips (NYSE: COP  ) and Chevron (NYSE: CVX  ) the boot in a nationalization spree. That'll scare the daylights out of investors looking at a Venezuela-centric company like Harvest, but at these prices, the market is acting like being kicked out of Venezuela is a foregone conclusion -- and like Harvest's other assets in China, Africa, Indonesia, and here in the U.S. are essentially worthless, as well.

Money for nothing and the company for free
Moving on to a company that actually trades for less than its net cash on hand, Global Gains recommendation Nam Tai Electronics has been absolutely slaughtered since its CEO resigned in early November ... never a very reassuring sign. Confidence or no confidence, it's hard to keep looking the other way at these prices. As skymutt2 recently pointed out:

Yeah, business is lousy, sales have plummeted, management is a big question mark. But guess what-- they still have a great balance sheet and will survive this storm, and will be poised to generate lots of cash in the next up cycle. You buy these kind of companies when things look the worst and you sell them when business is going great.

The kicker is that this company pay a regular dividend, and a big one at that. They could slash it in half and it would still be a huge dividend, and they have the cash to pay it either way.

Well put. Business is going to be a doozy for the electronics industry, but the indisputable strength of this balance sheet, paired with the complete capitulation of the company's stock price, provides a pretty darn nice margin of safety going forward.

Any of these ideas catch your attention? Consider checking out Motley Fool CAPS, our stock rating system where more than 120,000 investors share their thoughts and opinions. Click here to gives CAPS a whirl. It won't cost you a dime.

For related Foolishness:

Fool contributor Morgan Housel owns shares of Harvest Natural Resources. Nam Tai Electronics is a Motley Fool Global Gains recommendation. The Motley Fool is investors writing for investors.


Read/Post Comments (2) | Recommend This Article (19)

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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 December 09, 2008, at 8:01 PM, Imperial1964 wrote:

    On initial glance, I like 3 out of 4. Looking at HNR's stats, I found something peculiar that I think is worth mentioning: A price to sales ratio of over 15, which I consider high. But the P/E ratio is 3. Something is weird here.

    Turning to the income statement I found the answer. EBITDA is very negative. "Other income" is where all the earnings come from, and it's not cash income. This "Other Income" is more than 5x revenues.

    If you look at the Cash Flow, it's negative.

  • Report this Comment On December 22, 2008, at 2:57 PM, SkyWestNM wrote:

    Thank you, thank you, thank you. STV's not only showing great financials with growth but they recently decided to share some of that cash with their stockholders....new stockholders like me thanks to your article. On February 28, I'll pick up a one time special dividend of a buck a share (fully over 13.5% of my investment) all at once. I won't even have to wait for quarterly disbursements. Wow!

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