Stocks: The Kings of Cash

S&P tracks down the blue chip names with the biggest cash stockpiles—and the top ratings from its equity analysts

by Beth Piskora From Standard & Poor's Equity Research

Corning (GLW) provides specialty glass and ceramics products in the U.S. Getty Images

Even amid financial-market turmoil and a slowing economy, the amount of cash and similar investments on the balance sheets of major U.S. companies has grown over the past year. As of Mar. 21, S&P 500-stock index companies (excluding financials, utilities, and transportation) had $615.5 billion of cash, up from $606.6 billion as of Mar. 30, 2007, according to Howard Silverblatt, senior index analyst at Standard & Poor's. (These figures exclude financial, utility, and transportation companies because they maintain high cash reserves as a part of their normal operating process.)

Large cash positions are generally considered a positive, from an investment perspective, because they allow companies to pay dividends, buy back shares, acquire other companies, or otherwise use the cash strategically to improve shareholder value.

Playing with Corporate Cash

How can investors play the great corporate cash hoard? We took one possible approach in this week's screen. Our first step, naturally enough, was to screen the S&P 500 index for the companies with the largest cash positions. But we wanted to find other attributes that would enhance the attractiveness of these cash-rich companies.

So our next step was to find the stocks from that list with rankings of 4 STARS (buy) or 5 STARS (strong buy) from S&P Equity Research. Stocks with those designations are expected by S&P analysts to outperform the S&P 500 on a total return basis over the next 12 months and to rise in price on an absolute basis.

Further, we limited the names on our list to U.S. companies or foreign companies with significant operations and revenues in the U.S. And as we mentioned earlier, we excluded financial, utility, and transportation issues.

Twenty-one stocks made the cut. For more information on the companies on the list, take a look at the accompanying slide show.

Piskora is managing editor of U.S. Editorial Operations for Standard & Poor's .