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 it 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 distribute to shareholders. 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 120,000 members of the Motley Fool CAPS investor intelligence community, to see which ones might have the best chance of outperforming the market.

Over the first 20 months since CAPS began tracking the 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)

American Science & Engineering (NASDAQ:ASEI)



Brocade Communications (NASDAQ:BRCD)



ConocoPhillips (NYSE:COP)



Manitowoc (NYSE:MTW)



Southern Copper (NASDAQ:PCU)



Source: 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 has stated that the value of a company today is calculated by its discounted future cash flows. In that light, use this list as a jumping-off point to dig deeper into these companies' piles of cash.

Softness in the metals markets drove BHP Billiton (NYSE:BHP) to abandon its pursuit of Rio Tinto (NYSE:RTP), a deal that would have made BHP -- already the world's largest mining concern -- an even more formidable foe. That same uncertainty in the global economy and financial markets also dropped Southern Copper's stock down a mineshaft. Yet it's also given value investors an ideal opportunity to dig through the slag heaps. CAPS member JonBarleycorn thinks he's still found a rich vein in Southern Copper:

Bottom fishing. Reduced demand and the slumping US economy are killing resource stocks like Southern Copper. While [Southern Copper] has had great markets in India and China, analysts are now focusing on the reduced demand for Southern Copper’s products and, many believe that this is going to slow [Southern]’s growth significantly.

Ring the register
Although it dabbles in food service and ship construction, Manitowoc's primary business is the manufacture and sale of cranes. While more than 80% of its sales come from this segment, revenue is roughly split between domestic and international sales, giving the company some diversity here.

If construction cures an ailing economy, top-rated CAPS All-Star mrindependent figures that Manitowoc has what the doctor ordered: "If building stuff is the answer to the world's economic dilemma, then this company should thrive. The current price rundown is unjustified and overdone."

Change agent
CAPS member Dosada123 thinks oil giant ConocoPhillips is cheaply valued these days. Shares trade about a third lower than what Warren Buffett was recently willing to pay for them:

Conoco's return on equity has been up and down a little bit over the last 10 years, but has still averaged 17%. Low debt to equity ratio (.24), and is available at "bargain bin" P/E ratio of 3.69. Purchased by Warren Buffet at estimated price of $80...currently at $45.

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. Why not head over to the completely free CAPS service and share your thoughts on these or any other stocks that you think will keep rolling in the dough.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.