Had Jerry Maguire been an investor, instead of a fictional sports agent, he might have become famous for yelling, "Show me the cash flow!"

Earnings come and go, and the green-eyeshade types can legally manipulate those figures to mask a company's true operations. Yet the ability to generate cash -- what comes in the register and goes out the door -- remains the preeminent indicator of company's worth. In short, cash is king.

Below, we'll look at companies that have proven themselves prodigious generators of free cash flow (FCF) -- the amount of money a company has left over that it could potentially pay to its investors. We'll find companies that have generated compounded free cash flow growth rates exceeding 25% annually over the past five years. Then we'll pair them with the opinions of the more than 120,000 members of the Motley Fool CAPS investor intelligence community, to see which of these companies might have the best chance of outperforming the market.

Over the first 20 months since CAPS began tracking data, four-star stocks have outperformed the market by more than seven percentage points, while five-star stocks did even better. Keeping an eye on these top stocks might signal your best opportunity to capture those gains.


Levered FCF 5-Yr. CAGR

CAPS Rating (5 stars max)

CVS Caremark (NYSE:CVS)






Freeport McMoRan (NYSE:FCX)






Penn West Energy (NYSE:PWE)



Source: Capital IQ, a division of Standard & Poor's; Motley Fool CAPS.
CAGR = compound annual growth rate.

Generating copious amounts of cash doesn't make a company an automatic buy. But having looked at Enron's cash flows, instead of its earnings, would have saved many investors a lot of grief. Warren Buffett understands that the value of a company today is calculated by its discounted future cash flows. To follow in the Oracle of Omaha's footsteps, use this list as a jumping-off point to dig deeper into the piles of cash.

Working with open-source software makers will help companies like Oracle, IBM (NYSE:IBM), and even Microsoft (NASDAQ:MSFT) stay competitive. As open-source programs gain more adherents, ensuring a smooth integration for those programs with existing applications should allow Oracle's customers to remain confident in its own software. CAPS member PEG1765 admits that open source is a growing threat, but believes that Oracle remains the industry leader for enterprise-level platforms:

Oracle is still the preeminent database out there for large industry and government, it also has a strong consulting team. While Open Source is coming along, enterprise licenses are good, and so long as Oracle continues to work at those, they should maintain their lead, as enterprises like to have reliable, accountable support when software issues rise.

Ring the register
With a slowing global economy pushing the price of commodities down, Freeport-McMoRan has announced that it's slashing production of molybdenum, a key metal used in strengthening steel. Following steelmakers' comments about slowing demand, Freeport's news is hardly surprising, but it'll nonetheless pinch near-term earnings. CAPS member Wayfarer2003, for one, seems undeterred:

Freeport-McMoRan owns some of the most coveted mines in the world. ... [R]aw materials are down because of the global fiscal crisis... It is currently at its lowest P/E ratio of the past decade. Dividend yield is currently 6.7%, so you earn a decent return in spite of the gyrations of stock prices.

Follow the money
While these stocks produce a trail of dollars, it pays to start your own research on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Why not head over to the completely free CAPS service, and let us hear what you've got to say about these or any other stocks  you think will continue to roll in dough.

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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.