"I don't look to jump over seven-foot bars: I look around for one-foot bars that I can step over."
-- Warren Buffett

If you're in the market for those one-foot bars Buffett loves, here's one of the best places to look: companies beaten to such a pulp that just their net amount of cash on hand represents a significant portion of the share price. In some cases, you're being handed the actual business operations for free -- or at least, close to it. Doesn't get much better than that, does it?

Using our Motley Fool CAPS screening tool, I searched for companies fitting these bargain-basement criteria. Specifically, I looked for:

  • Estimates of profitability in 2009.
  • No long-term debt.
  • A high level of total cash in relation to current share price.

Pretty simple, eh? Among others, I came across these five:

Company

Market Cap

Recent Price

Total Cash per Share

2009 EPS Estimates

CAPS Rating
(5 max)

E-House (NYSE:EJ)

$510 million

$6.18

$2.09

$0.56

****

Fuel Tech (NASDAQ:FTEK)

$216 million

$9.01

$1.36

$0.28

****

Garmin (NASDAQ:GRMN)

$3.63 billion

$17.90

$2.66

$3.05

****

Omnicell (NYSE:OMCL)

$249 million

$7.95

$3.99

$0.31

***


VASCO Data Security
(NASDAQ:VDSI)

$254 million

$6.80

$1.35

$0.64

*****

Data from Yahoo! Finance and CAPS as of Jan. 27, 2009.

You can run the same screen yourself, if you like. None of these are formal buy recommendations -- just a good starting point for more research.

Searching for direction
Shares of GPS manufacturer Garmin are now down more than 72% in the past year for two good reasons: (1) They were spectacularly overvalued in the first place, and (2) The allure of clunky GPS devices loses relevance when Apple (NASDAQ:AAPL) iPhones and Research In Motion (NASDAQ:RIMM) BlackBerrys provide the same service from your phone.

Motley Fool co-founder David Gardner (TMFBreakerDave) summarized the concerns over innovation anxiety last month, writing in CAPS:

I am worried for Garmin that its core technology -- GPS devices -- is being disrupted through assimilation of GPS features in many other non-Garmin devices (Apple iPhone just one example). While in many ways Garmin still does it better, the nature of disruptive innovation is that others satisfy the desires of the marketplace at much cheaper price points, and even if the product is not as good, it's "good enough."

As one of those iPhone owners who thinks the navigation function is indeed "good enough," I agree; the imposing threat against Garmin's turf is very real. Where I might deviate from this view -- especially from an investment standpoint -- is that I think the 70%-plus plunge in the past year has already fully discounted those shortcomings into today's share price.

At 18 bucks a pop, Garmin trades at around six times 2009 earnings estimates. Better yet, its balance sheet is loaded to the gills with cash without a penny of debt. That's really the critical factor here: Disruptive innovation typically only becomes fatally disruptive when a company doesn't have the balance-sheet firepower to fight back (just ask General Motors).

Now, don't get me wrong: The prevailing thought that Garmin's days of magnificent growth are over is probably spot on. Thankfully, that's exactly what this $18 dollar stock is priced for. How do I know? Look at long-term earnings estimates:

Year

2009

2010

2011

2012

EPS estimates

$3.05

$2.78

$3.23

$3.33

Data from Yahoo! Finance and Capital IQ, a division of Standard & Poor's.

Of course, long-term projections can be -- and often are -- catastrophically wrong. So, let's assume the forward earnings estimates are way optimistic, and Garmin earns an average of $1.50 per share for the next four years. At $18 a share, that's an 8.3% earnings yield at a time when interest rates are essentially zero. Strip out the $3 per-share excess slug of cash, and the ongoing business is in essence selling for around $15 per share, which (using those same gutted estimates) equates to a 10% earnings yield -- by almost any measure, a wholly acceptable result. And if the analyst estimates are correct, well ...

I could be terribly wrong with Garmin, but maybe that's the point: At $18 a share, there's a tremendous amount of room to be wrong and still squeeze value out of this stock. When markets capitulate and fear reigns, situations occur where the upside can be great while the downside is both limited and improbable. Garmin appears to be one of those situations.

Take it away, Fool
Disagree? See it in another right? Just want to see what the rest of the Foolish community is saying? More than 125,000 investors use CAPS to share ideas and swap opinions. Click here to check it out. It won't cost you a dime.

Further Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Garmin is a Motley Fool Global Gains selection. VASCO Data Security International and Apple are Stock Advisor recommendations. The Motley Fool is investors writing for investors.