The market has had a nearly uninterrupted move higher over the past four months, so I constantly need to remind myself not to forget about potential value plays. Value, of course, is in the eye of the beholder, but one of the factors I've been on the lookout for is a strong cash position. Cash can be used as a buffer during rough economic times, while it also provides the financial flexibility to make purchases or provide that "dangling carrot" for a potential acquiring company.

Below, I've outlined two micro-cap stocks that passed my initial value test in that they are cash-rich, profitable, and trade at very reasonable price-to-book levels. Does this guarantee them both success? Not at all, but it's a great starting point for further research.

Full of hot air
A-Power Energy Generation Systems (Nasdaq: APWR) is a company you'd love to be full of hot air since it's an alternative energy play in the wind turbine sector.

Why would it be trading so inexpensively, you might wonder? The company has had a hard time booking recurring revenue, and it recently ended its supply agreement with General Electric (NYSE: GE). During the past three quarters, the company has posted earnings well short of analyst expectations because of delays related to projects.

So why bother with A-Power? Currently, its net cash position amounts to 40% of its market cap. It's trading well below book value and at less than eight times 2011 profit projections. These initial figures look enticing.

Can you hear me now?
Nam Tai Electronics (NYSE: NTE) operates out of the mobile phone and smartphone components business, supplying Bluetooth devices and LCD modules.

Why is Nam Tai trading so cheaply relative to its peers? Fickle consumer spending habits since 2007 have provided a drag on revenues and eaten sharply into its overall profit. Despite the revenue decline, Nam Tai has seen profits recover in 2010.

So why buy Nam Tai and not one of its competitors? First, Nam Tai has paid out a dividend for most of its 18-year history of trading in the U.S., something not often found in a micro cap, despite a two-year hiatus during the recession. Also, Nam Tai is completely debt-free! Its $4.87 in cash per share accounts for 75% of its current stock price. With 2011 revenue growth expected to be about 10% and the stock trading at 16 times 2011 projections, I think Nam Tai is still compellingly valued.

Not all cash is created equal
It's important to remember that not all cash-rich companies are compelling stocks. Vanda Pharmaceuticals (Nasdaq: VNDA), for example, received a $200 million royalty payment from Novartis (NYSE: NVS) in 2009 for the licensing rights of its schizophrenia drug, Fanapt. It's true that cash represents more than three-quarters of Vanda's market cap right now, but with only one drug in its pipeline and an uncertain future revenue stream, that cash will only last so long as the company spends to develop new drugs.

Do you have a cash-rich company on your watchlist? Let's hear about it in the comment section below!

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