Stocks can 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 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 what's one of the most important ingredients in the recipe for those yummy wealth-building gains? You guessed it -- cash.

A Fool's guide to free cash
Investing, after all, 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 run a simple 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.

Cash kings rule
Unlike a company such as China BAK Battery (NASDAQ:CBAK), which has cash gushing out of its corporate windows, these companies have it practically flooding the mailroom.

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


Cash King Margin (ttm)





Moody's (NYSE:MCO)




American Eagle Outfitters (NASDAQ:AEOS)








All three stocks are Motley Fool Stock Advisor picks, but as with any stock, be sure to do your homework before buying. 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.

King of credibility
With a whopping free cash flow-to-sales margin of more than 35%, Moody's takes the honors as this week's most prolific cash king. As part of a dominating duopoly with McGraw-Hill's (NYSE:MHP) Standard & Poor's, Moody's has the credit-rating experience, expertise, and capital-light business model to keep its fortress flush with cash.

Even with the recently passed Credit Rating Agency Reform Act -- a law designed to open the industry to increased competition -- CAPS All-Star gramphilwar believes that the vast majority of firms will continue giving credit business where credit business is due:

"These guys are protected by a moat of 'credibility' and 'respectability' created over the last 100 years. Difficult, even with legislation, to overcome those kinds of barriers -- sort of like a chicken and the egg problem -- can't get any ratings business without ratings experience and can't get any experience because you can't get the business. MCO is in what seems like a stable duopoly with S&P."

Fashion that's fit for a king
American Eagle Outfitters is a free-cash-flowing ruler that utilizes a potent market demographic and sharp, margin-enhancing initiatives in its role as one of the most profitable retail apparel stores in North America. Specifically, American Eagle uses savvy, but disciplined marketing -- so as not to "water down" the brand -- in order to win over the hearts and wallets of spendthrift teenagers.

Thanks to the company's rock-solid financials and new growth endeavors, CAPS player theBaumer thinks this is one super-cool king who won't be going out of style anytime soon:

"American Eagle is poised for significant growth with its quality merchandise decisions, well executed new ventures (aerie & Martin + Osa), well organized website, and solid fundamentals. American Eagle will continue to benefit from stumbles by competition."

A man with a golden ARM
Our last free cash flow king this week is ARM Holdings, the world's leading licensor of semiconductor intellectual property (IP). Because of ARM's truly innovative chip designs -- not to mention the recurring nature of its revenue stream -- the England-based monarch is in a great position to benefit from the massive growth of digital electronic products.

It's that kind of knack for innovation and global market opportunity that has our CAPS community excited about ARM Holdings' future. NetscribeSemiCdr, for example, thinks that the shares offer a well-armed position:

"The company is in a very strong financial shape, with an unlevered balance sheet and low capital expenditure needs; giving a boost to its free cash flows ... Looking at these positive points working in the company's favor, the stockholders are expected to benefit from its growth in the future."

The Foolish bottom line
Free cash flow-generating companies like Moody's, American Eagle Outfitters, and ARM Holdings 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, or read how your fellow Fools feel about thousands of different stocks. Click here to join the forward-thinking CAPS community free of charge.

Be sure to join us next week, when I'll feature three more cash kings from CAPS. Until then, may your free cash flow rule with golden arms -- and fists.

For more CAPS-style Foolishness:

American Eagle Outfitters, Moody's, and ARM Holdings are Stock Advisor choices. You can find out why with a 30-day free trial.

Fool contributor Brian Pacampara likes to buy the kings of the castle and short the dirty rascals. He owns shares of American Eagle Outfitters. The Fool's disclosure policy is the strict set of rules that always rules Fools.