Smart Money Stock Picks in Strong Cash Positions

Before you go, we thought you'd like these...
Before you go close icon

Since the recession, persistent uncertainty has caused many U.S. companies to stockpile their cash as a way to prepare against future dips in demand. Apple currently has an astonishing $81.6 billion in cash, although CEO Tim Cook said the cash isn't "burning a hole in our pocket." Google also reported $42.6 billion in cash at the end of the third quarter. What does this mean for investors?

Cash is king
High levels of cash mean that a company is in a safer position to endure future lulls in demand -- a great asset at a time when IMF chief Christine Lagarde is warning of the risk of a global "lost decade" amid a quickly evolving European debt crisis.

High cash also puts companies in a strong position to enter a global recovery, allowing for hefty acquisitions that would otherwise not be possible. A great example is Google's plan announced in August to purchase Motorola Mobility for $12.5 billion, allowing Google to enter the mobility hardware business.

Investing ideas
The more volatile markets become, the more comfort investors may find in stocks with large amounts of cash relative to operating expenses.

With that idea in mind, we ran a screen for stocks with the highest amounts of cash relative to their average quarterly operating expenses. We also searched for companies with buying attention from the "smart money" investors: institutional investors and company insiders.

The smart money believes in these cash-comfortable names -- do you? Use this list as a starting point for your own analysis.

List sorted by cash / avg. operating expense. (Click here to access free, interactive tools to analyze these ideas.)

1. Complete Genomics (NAS: GNOM) : Develops and commercializes a DNA sequencing platform for human genome sequencing and analysis. Average quarterly operating expense over the last five quarters at $16.42M, vs. most recent cash and short term investments at $126.41M, implies a Cash / Avg. Operating Expense ratio at 7.7. Net institutional purchases in the current quarter at 6.4M shares, which represents about 62.62% of the company's float of 10.22M shares. Over the last six months, insiders were net buyers of 1,650,000 shares, which represents about 16.14% of the company's 10.22M share float.

2. GTX (NAS: GTXI) : Engages in the discovery, development, and commercialization of small molecules to treat cancer, osteoporosis and bone loss, muscle loss, and other serious medical conditions. Average quarterly operating expense over the last five quarters at $11.27M, vs. most recent cash and short term investments at $83.01M, implies a Cash / Avg. Operating Expense ratio at 7.37. Net institutional purchases in the current quarter at 11.4M shares, which represents about 53.98% of the company's float of 21.12M shares. Over the last six months, insiders were net buyers of 6,978,510 shares, which represents about 33.04% of the company's 21.12M share float.

3. Alimera Sciences (NAS: ALIM) : Engages in the research, development, and commercialization of prescription ophthalmic pharmaceuticals. Average quarterly operating expense over the last five quarters at $5.55M, vs. most recent cash and short term investments at $38.61M, implies a Cash / Avg. Operating Expense ratio at 6.95. Net institutional purchases in the current quarter at 2.0M shares, which represents about 27.25% of the company's float of 7.34M shares. Over the last six months, insiders were net buyers of 7,553 shares, which represents about 0.10% of the company's 7.34M share float.

4. Midway Gold (NYS: MDW) : Engages in the acquisition, exploration, and development of mineral properties in North America. Average quarterly operating expense over the last five quarters at $2.47M, vs. most recent cash and short term investments at $15.26M, implies a Cash / Avg. Operating Expense ratio at 6.17. Net institutional purchases in the current quarter at 7.8M shares, which represents about 10.18% of the company's float of 76.63M shares. Over the last six months, insiders were net buyers of 100,000 shares, which represents about 0.13% of the company's 76.63M share float.

5. Winthrop Realty Trust (NYS: FUR) : Engages in the ownership and management of real property and real estate-related assets. Average quarterly operating expense over the last five quarters at $10.66M, vs. most recent cash and short term investments at $51.34M, implies a Cash / Avg. Operating Expense ratio at 4.82. Net institutional purchases in the current quarter at 4.3M shares, which represents about 14.75% of the company's float of 29.16M shares. Over the last six months, insiders were net buyers of 198,400 shares, which represents about 0.68% of the company's 29.16M share float.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Kapitall's Alexander Crawford does not own any of the shares mentioned above. Accounting data sourced from Google Finance, institutional data sourced from Fidelity, insider data sourced from Yahoo! Finance.

At the time this article was published The Motley Fool owns shares of Google and Apple. Motley Fool newsletter services have recommended buying shares of Apple and Google. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Read Full Story

Want more news like this?

Sign up for Finance Report by AOL and get everything from business news to personal finance tips delivered directly to your inbox daily!

Subscribe to our other newsletters

Emails may offer personalized content or ads. Learn more. You may unsubscribe any time.

From Our Partners