5 Stocks Making Cash

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 them to mask a company's true operations. Yet its ability to generate cash -- what comes in the register and goes out the door -- remains the preeminent indicator of a 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 pair them with the opinions of the more than 140,000 members of the Motley Fool CAPS investor intelligence community, to see which ones might have the best chance of outperforming the market.

Sources: Capital IQ, a division of Standard & Poor's; Motley Fool CAPS.
CAGR=compounded 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, so use this list as a jumping-off point to dig deeper into the piles of cash.

Ka-ching!
Considering the solid performance of its products last quarter, a pipeline thick with potential, and an industry-leading position in HIV treatment, it's a bit surprising Gilead Sciences hasn't been able to advance as far this year as have industry peers Sanofi-Aventis (NYSE:SNY) or Merck (NYSE:MRK), or even the broader averages.

When the market ignores reality as it seemingly has here, it provides investors with an opportunity to initiate a position at a good price. CAPS member sccoast1700 views the wide swath of treatments Gilead offers as solid downside protection:

A recession proof business. Leader in HIV /Aids treatment. Good products in the works for hypertension, liver fibrosis, and chrohic hepatitis c. Solid balance sheet.

Investors are decidedly in the bull camp with Gilead, as 97% of the more than 1,750 CAPS members rating the biotech believe it will outperform the market, with a like percentage of All-Star members agreeing. Have we heard from you yet? If not, head over to Gilead Sciences' CAPS page and have your say.

A strong signal
In the war for television customers, it's a fierce battle between cable, telephone, and satellite. After awhile, though, the commercials featuring the dorky FiOS guy and his chubby cable sidekick and those with cable's unibrowed spokesman seem to run together.

DIRECTV's ad campaign is a little more memorable, but perhaps not in the way the satellite-programming provider intended. Ads featuring the late comedian Chris Farley have caused a bit of a backlash for being in bad taste, but it's not the first ad the company has used featuring a dead actor: They also ran one with Heather O'Rourke, the little kid from Poltergeist who gave us the memorable line "They're heeeere!" She died in 1988 at the age of 12.

But resurrecting the dead might be the least of DIRECTV's problems. It's been able to generate lots of free cash flow because it added fewer customers than anticipated last quarter while its churn rate jumped. In the short term, that works out well for the satellite TV provider, because money not spent on hooking up new customers with expensive equipment allows free cash flow to soar. In fact, the metric doubled from the year-ago period, making more money available to repurchase shares.

Yet that can only go on for so long. Losing customers instead of adding them, even if it increases cash flows, is ultimately a losing business model. If the company can turn around those subscriber numbers, its copious amount of cash will be an attractive feature, and it's one that's already caught the attention of highly rated CAPS All-Star antonioexpo:

company is spitting csh flow like crazy and using it to buy-back stock with no signficant movement to the upside... eventually shares will respond higher (20% avg gain per year)

The question is, can DIRECTV get customers moving its way again? Head over to DIRECTV's CAPS page and tell us whether the satellite programming station has its signals crossed. Or you can use the comments section below.

Follow the money
While these stocks have left 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. Head on 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 be rolling in the dough.