Buy A Cash-Rich Company's Stock? Maybe Not
By Market Blog:
Companies with a balance sheet packed with cash are tempting targets for investors. But should they be? Maybe not, says Gregory V. Milano, co-founder and CEO of Fortuna Advisors LLC. In a blog post Monday on cfo.com, the website of the trade publication CFO magazine, Milano says his firm’s research suggests cash hoarders underperform their peers.Fortuna Advisors looked at the largest non-financial U.S.-domiciled companies that had audited financials and share-price data for the last 10 years; the list ended up with 885 names. The average company now has 7.3 percent of its assets in cash – nearly double the level 10 years ago, but a number now exceed 15 percent cash, and a few topped 40 percent. Fortuna defined “cash hoarders” as those companies that averaged 15 percent cash over the entire period. That list included Apple (AAPL), Amazon.com (AMZN) and Celgene (CELG), to name three. “Our research ofComplete Story »
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