Cash is king. While a bad business can outlast any cash hoard, cash provides valuable liquidity to companies. This liquidity is especially important when a company is distressed. Below are some companies trading near 52 week lows with lots of cash on their balance sheets.
American International Group (AIG)
Cash: $1.558 billion
Short Term (ST) Investments: $42.185 billion
The global insurance firm's liquidity in the last quarter was a bit inflated as the firm prepared its bid for the Maiden Lane II assets. Still, the company has some excess capital and could likely benefit from investing in higher yielding assets. While notable investors funds like Fairholme Funds and Glenview Capital have acquired stakes in AIG, the company remains generally ignored by the investing public. "Investors Need to be Very Cautious About 'Cheap' AIG" covers many of the reasons why investors should be cautious about AIG even though it is very cheap relative to traditional valuation metrics.
Nokia Corporation (NOK)
Cash: $2.618 billion (12/31/2010)
ST Investments: $13.850 billion
Even as with the strong secular global growth in smart phone demand, the world's largest cell phone manufacturer has struggled against competition from Apple and Android operating system-based phones. While Nokia continues to produce its Symbian-based phones, its venture with Microsoft (MSFT) means that it will have a powerful partner going forward. The deal should provide benefits to both parties as the upfront payment to Nokia will reduce R&D risk while Microsoft essentially acquires the development capacity of the world's largest cell phone maker for $1 billion upfront.
Declining revenues and margins have haunted Nokia. The Microsoft deal has the potential to maintain Nokia's role in the global mobile device market. Even if the deal fails, the company's massive liquidity provides some margin for safety.
Eastman Kodak (EK)
Cash: $1.624 billion
Despite being one of the more iconic brand names in the United States, Eastman Kodak has fallen on hard times as its businesses transition. While the company's last two years of negative cash flow from operations illustrates that the company is distressed, there may be reasons for investors to take a closer look. After years of revenue decline, revenues seem to have stabilized in 2009 and 2010. In addition, there was an improvement in gross margins. These developments could be the seeds of a turnaround.
PulteGroup, Inc (PHM)
Cash: $1.495 billion
The U.S. housing market remains weak, but PulteGroup generated positive cash flows from operating activities in recent years. Investors confident in housing market strength should consider this stock. In addition to the cash load, its stock price is near 2001 levels.
Weyerhaeuser Company (WY)
Cash: $1.467 billion
Cree, Inc (CREE)
Cash: $465.557 million
ST Investments: $645.271 million
Tellabs, Inc (TLAB)
Cash: $208.80 million
ST Investments: $1.139 billion
Office Depot, Inc (ODP)
Cash: $627.478 million
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