5 More Stocks for Fast Cash

We've all heard the mantra "cash is king." But a fistful of dollars today deserves the royal treatment more than a wad of cash down the road. We want our companies turning their products into cash -- fast!

The cash conversion cycle
Enter the cash conversion cycle. It tells us how quickly a company turns cash invested in inventory into cash in the bank after collecting credit sales from customers and paying off its suppliers. The faster a company can turn over its inventory, the more efficiently it's managing its assets. There are three components of the cycle, and here's how they operate:

• Days Inventory Outstanding (DIO)
  Inventory sitting on store shelves or in stockrooms is not doing the company, or the investor, any good. The number of days the inventory sits there measures how quickly management can get those Speedos off the racks and onto the beaches of Malibu. Obviously, lower numbers are better.
  DIO = 365 days/(cost of goods sold/average inventory)

• Days Sales Outstanding (DSO)
  Outstanding sales are those the company hasn't yet been paid for; they're languishing in accounts receivable. We want our companies to not only make quick sales, but also get paid for them right away. The faster, the better.
  DSO = 365 days/(sales/average accounts receivable)

• Days Payable Outstanding (DPO)
  While we want customers to pay us quickly, we want to take our sweet time paying our bills. By paying suppliers slowly, a company keeps its cash available to spend on things it needs, like inventory, so we want this number to be higher.
  DPO = 365 days/(cost of goods sold/average accounts payable)

Putting it all together
With the three pieces of the puzzle calculated, we can figure out how long a company is taking to get paid for the products its customers are buying from inventory, minus the number of days it takes it to pay its suppliers. The cash conversion cycle, or CCC, equals DIO + DSO - DPO.

Here's a look at how a number of the best-known diversified conglomerates turn a multitude of products into cash.

Company	DIO	+	DSO	-	DPO	=	CCC	CAPS Rating (out of 5)
Honeywell (NYSE: HON  )	55.8	+	56.4	-	49.8	=	62.4	****
Tyco (NYSE: TYC  )	64.0	+	60.8	-	41.4	=	83.4	*****
Dover (NYSE: DOV  )	60.8	+	58.5	-	35.9	=	83.4	***
United Technologies (NYSE: UTX  )	71.0	+	56.7	-	43.5	=	84.2	*****
3M (NYSE: MMM  )	78.6	+	51.4	-	41.8	=	88.2	*****

Each week, we look for the top companies in different industries that make fast cash, and this particular group doesn't seem to have been discounted by players in the Motley Fool CAPS investor intelligence database.

Not every company that makes fast cash will excel. We only want those firms that the CAPS community considers the best. Four- and five-star stocks are the ones the vast majority of CAPS investors believe will outperform the S&P 500.

The Foolish advantage
Of course, this isn't a list of stocks to buy or sell -- just a jumping-off point for further research.

Interestingly, conglomerates seem to have struck the fancy of CAPS investors, as most of this week's group of companies are highly rated. Coincidentally, most of the focus group also has a pretty standardized conversion cycle, too. The one standout, Honeywell -- even with its exposure to aerospace products and services, control, sensing and security technologies, automotive products, and specialty chemicals -- has a faster cycle than most, as it seems able to get its products out the door faster while holding onto payments a bit longer.

• CAPS All-Star sadiqpunjani likes Honeywell because it "is a safe stock. I don't see a whole lot of volatility in this stock. [With] them getting a $400 million contract from Army Pact and 10.7 million contract from Navy, their profits are bound to be higher and should be able to produce higher returns and at least match the analyst forecasts."

• Top-rated CAPS investor PopsDaniecki sees a correction on the horizon for the market, but remains a Honeywell bull. "While I think everybody + everything is set for a major correction, I STILL can't go against such a wealthy and innovative ridden defense 'horse' like HON. I think that the next five months will be good to it and I am in it for at least that long."

So, is diversification the secret here, or does a lack of focus work against these companies? Work with thousands of your fellow Foolish investors at Motley Fool CAPS to uncover the best stocks and convert your money into cash profits. It's absolutely free -- get started today!

3M and Tyco are recommendations of Motley Fool Inside Value. A 30-day free trial subscription lets you see all of the diversified recommendations that are currently beating the market by nearly 10 percentage points. Click here to start yours today.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.