3 More Kings of Cash

Stocks can really be confusing. Just think about it. There are literally thousands of stocks to choose from worldwide, their prices wiggle around on a second-to-second basis, and investors always have conflicting opinions about every single one of them! Talk about stimulus overload.

One of the biggest keys to investing is being able to drown out Mr. Market's mania, while at the same time focusing on the things that actually matter to long-term market returns. And just what is the most important ingredient in the recipe for those yummy, superior, outsized wealth-building gains? You guessed it -- cash.

A Fool's guide to free cash
After all, investing is about putting money up front today to get more of it in return tomorrow. Here at the Fool, we're firm believers that free cash flow, as opposed to traditional accounting earnings, is the best gauge of a firm's profitability (or lack thereof). You can learn more about the importance of free cash flow here.

So with those cash flow lessons deeply ingrained in your Foolish subconscious -- or maybe just bookmarked as a "favorites" page -- I'll highlight three cash-cow favorites of our Motley Fool CAPS community.

I'll simply screen for companies with free cash flow-to-sales margins above 15% (also known as the Cash King Margin) that our community is overwhelmingly bullish about, as well. The Cash King Margin is a good way to account for size differences among companies, rather than just using an absolute level of free cash flow.

Cash Kings rule
Unlike companies such as Raser Technologies (NYSE:RZ) that have the cash gushing out of their corporate windows, these companies have it practically flooding into the mailrooms.

So, let's not waste another second. Sound the trumpets! Here's another trio of cash kings from CAPS:

As always, don't consider these stocks as formal picks, but rather as suggestions worth further investigation. After all, due diligence is the Fool's way to riches.

But just for starters, here's a quick summary of the stories behind these cash-throwing kings, and how some of our CAPS players feel about them.

You wouldn't like this king when he's angry
With a whopping free cash flow-to-sales margin of more than 45%, Marvel Enterprises takes the honors as this week's most prolific cash king. As one of the most dominant character-based entertainment companies in the world, this is one king with the cast of blockbuster superheroes (and villains), light capex business model, and Iron Man-like balance sheet to keep its fortress flush with cash.

Marvel's library of more than 5,000 characters -- which include the wildly popular Spider-Man, X-Men, Fantastic Four, Captain America, and Incredible Hulk -- made it an easy three-time pick for our team over at Motley Fool Stock Advisor. The original recommendation is up more than 700% since it was first recommended back in 2002, but with Marvel's high-risk/high-reward decision to finance its own films in 2008, this superhero could be flying high for quite some time.

CAPS player Har1en is just one Fool who senses sensational things for this Spidey in '07:

"It's fairly obvious that there Marvel has some towering earnings potential to be had in 2007. The actual money from the sale of toys and DVDs will mostly post to the financials in 2008, so I believe that this stock will see significant runup during 2007, even after its already strong performance this year (2006)."

The real Iron Man
Unlike Marvel's fictitious version, BHP Billiton is a real-life man of iron, using operations in petroleum, minerals, and steel to benefit its shareholders. BHP is one of the world's largest diversified-resource companies -- not to mention Australia's largest public firm -- with huge positions in manganese, diamonds, gas, silver, and iron ore, just to name a few.

Naturally, this king is able to deliver much more stable cash flows than your typical single-resource firm, due to its broad product diversification and low-cost size efficiencies. In other words, BHP is able to benefit from favorable price runs in most major commodities, while at the same time reducing the risk of being exposed to any one.

In my book, this king from the land down under offers a relatively safe and smart way to play the increasing global demand for commodities. CAPS All-Star JEndymion is another Fool who raves about BHP's resources:

"It is the largest raw materials/commodity play in the world. Not only is it at the top in aluminum, copper, ferroalloys, iron ore, titanium minerals, it also has my favorite mineral uranium. Also the company has a P/E around 10. Plus BHP is going to benefit heavily from the growing economy in China."

A taste of hog heaven
Our last free cash flow king this week is Harley-Davidson, a small, obscure, and relatively unknown manufacturer of motorcycles ... yeah, right! With easily the most recognizable brand of heavyweight hogs and a loyal (if not fanatical) rider base developed over several decades, Harley stands as an age-old American company of truly iconic proportions.

Founded in 1903 and headquartered in Milwaukee, Harley-Davidson controls about 50% of the motorcycle share in the U.S., with a comfortable lead over its closest competitors, Honda (NYSE:HMC) and Suzuki. Thanks to the strength of its name, Harley has consistently delivered strong returns on equity and steady growth, and has habitually used free cash to pay out a healthy dividend and repurchase shares.

It's that type of brand power, moto-market share, and financial strength that has our CAPS community hog-wild over Harley Davidson. CAPS All-Star BenBino is currently riding high on this hog:

"With ROE in excess of 20% year after year and increasing dividends, this company [has] nowhere to go but up. Harley Davidson is widely recognized and expanding into China. With over 1.4 billion people there, the growth prospects are tremendous in the next couple of years."

The Foolish bottom line
Free cash flow-generating companies like Marvel Enterprises, BHP Billiton, and Harley-Davidson are always among my top candidates to research further. Our Motley Fool CAPS intelligence database is a great place to look for your own cash kings, read what fellow Fools think, and even voice your own opinion about your favorite stocks. Click here to join the forward-thinking CAPS community free of charge.

That's all for this week, Fools! Be sure to join us next week, when I'll feature three more cash kings from CAPS. Until then, may your free cash allow you to rest well and ride easy.

Fool contributor Brian Pacampara thinks bacon and pork chops are the true meaning of hog heaven and holds no position in any of the companies mentioned. The Fool's disclosure policy always rules Fooldom -- with no exceptions.