The stock market is forward-looking, so when it starts to stumble, it could be a sign of underlying softness in the economy. That's why it's understandable to feel some anxiety when your portfolio is taking a hit.
Staying in the market for the long term is the way to build wealth, so it doesn't make sense to jump in and out, trying to time pops and drops. But there are some types of equity investments that can help mitigate the worry one feels when the market is dropping. GPS devicemaker Garmin (GRMN 0.29%) has several of the attributes that make it one of those investments, and the market has put it on sale recently.
Image source: Garmin.
Cash is king
The old saying that cash is king can be debated in some respects, but having a strong cash position undoubtedly provides a cushion for the tough times. That is true in one's personal accounts as well as in a business. Garmin management has kept a large cash position through good times and bad, and it has allowed the company to be in a position to grow while others are struggling.
Companies with cash are at lower risk than those burdened with debt, and investors tend to turn more toward cash-rich businesses in times of uncertainty. That helps make now a good time to look into Garmin.
Apple is a well-known maker of popular tech devices also known for solid cash flow and massive amounts of cash on its balance sheet. This table compares Garmin with Apple to show how significant of a cash position Garmin holds.
| Company | Cash and Equivalents (Billions) | Recent Market Cap (Billions) | Cash as Percentage of Market Cap |
|---|---|---|---|
| Garmin | $3.1 | $21.2 | 14.5% |
| Apple | $202.6 | $2,525 | 8% |
Data source: Company financial reports. Table by author. Cash balance as of Dec. 25, 2021.
In addition to having nearly twice as much cash as Apple relative to its market cap, Garmin isn't carrying any debt. Apple chooses to hold debt, which it can easily cover with its reliable cash flow. But being debt-free is still a safer way to ride out any potential recession or unexpected market-roiling event.
Focusing on the business
Similar to Apple, Garmin also has prodigious cash flow -- enough that it can not only invest in growing its business but also pay shareholders a nice dividend. Garmin recently announced a planned 9% increase in its payout, which, once approved by its board of directors, will result in a dividend yield of about 2.7% at the recent share price. Apple's current dividend has an annual yield of about 0.6%.
Beyond that dividend payment, Garmin spends its cash on research and development (R&D) to continue to innovate and upgrade its wide-ranging product mix. The results have been steadily growing sales in virtually all of its segments over the last five years.
Data source: Garmin. Chart by author.
Even the company's formerly struggling automotive segment has now turned to growth mode. Management believes that positive momentum will continue, with auto revenue growing 5% in 2022. It expects overall revenue growth of about 10% for the year.
The stock's price-to-earnings (P/E) ratio is at its lowest level in more than a year, and the forward P/E was recently as low as it was during the pandemic era of early 2020. Garmin is a name to consider for investors who want to own a great business with less worry in case of increased market turbulence.
