Blog > US Stocks and Markets > Cash Is King: Recession-Proof Stocks
 | Email This Article Email This Article  | 

Cash Is King: Recession-Proof Stocks

Posted July 30, 2008

“Right now, cash is king. Consumers have put away their wallets. Lenders are even stingier. And the price of nearly every raw material is through the roof. If a company wants to survive, it had better be sitting on a big old mound of cash.” — Andrew Snyder

Blogger’s note: Andrew Snyder is back! And he’s writing from Alaska, or more specifically from a small fishing lodge somewhere near Ketchikan. But even up in the wilds of the last great American frontier, Andrew is keeping an eye out for great investments. He’s currently searching for cash-rich companies that can survive and thrive through the current market slide. But don’t take my word for it. Read on below to learn why Andrew swears that “cash is king” right now.

by Andrew Snyder

Baltimore and Ketchikan, Alaska — (TFN):  The equities market reminds me of a girl I used to date. Her mood could change faster than an afternoon breeze. One minute the world was grand, the next she was spewing fire from her nostrils and chasing me with a pitchfork.

Fortunately, there were medications designed to slow her down. That is not the case with the stock market.

Tune into the economic reports on any given day and it’s anybody’s guess as to what the news will be. One day, a major setback in new-job creation takes the market deep into the red. And whispers of a rising housing market bring it right back up the next. We’ve been on that nausea-inducing roller coaster for nearly 18-months.

Market Roller Coaster

Most amusement park rides are a bit of a letdown. You stand in line for an hour and a half, eagerly anticipating the ride of your life. After strapping in, you get pulled up a hill and zoom down the backside towards thirty eight seconds of neck-wrenching twists and turns. Eventually, you roll to a stop and say, “I waited two hours for that?”

Sadly, the economic coaster continues to bounce us around. And most passengers wanted off a long time ago.

With a ride that’s taking this long, only the strongest of stomachs will survive. As investors, it’s important to know and understand what tools a company needs to get out of this mess alive.

Right now, cash is king. Consumers have put away their wallets. Lenders are even stingier. And the price of nearly every raw material is through the roof. If a company wants to survive, it had better be sitting on a big old mound of cash.

GM Tanks, Again, but Merck Could Make It

General Motors (GM:NYSE) is a perfect example. We’ve known the company was in a lot of trouble for a long time.
Seemingly every month, the carmaker is announcing yet another turnaround strategy. With domestic auto sales screeching to a halt, the companies $45 billion cash reserve has been cut in half. GM is officially in panic mode.

Earlier this month, it announced its latest plan of action:  Can a bunch of employees, sell $4 billion in assets, and eliminate what is left of its shareholder dividend. In other words, GM’s executives are turning over the couch cushions scrounging for every dime and penny they can find. The company doesn’t stand a chance of pulling out of its 54-year-low stock price anytime soon.

If a company wants to endure this economic thrill ride, it must be well prepared. Cash is the key. There are lots of companies out there with huge cash hordes that will survive unscathed.

Merck (MRK:NYSE) is a great example. It has more than enough cash to continue pumping up its drug pipeline as the markets fluctuate and valuations adjust. FDA issues and litigation pulled share price down. A huge mound of cash will pull it right back to the top.

Just as the average American household depends on cash to survive, so does the American economy. Consumers have backed out of the market. Until they open their wallets once again, investors must search for the companies with the best cash positions.

Over the next few weeks, that will be my mission. I will uncover the companies with the best cash position and let you know which ones will make you money as this economy continues its moody ways. The equities market may be taking us on a bumpy ride, but it is nothing we cannot handle. As for that old girlfriend, she’s somebody else’s problem now. I hope he has a lot of cash.

****Make sure you sign up for our FREE TFN News Feed for breaking news, special reports and new financial videos. You can pick your favorite reader. Or if you prefer, you can have the feed delivered to your email.

Related Articles


Posted by Andrew Snyder · Filed Under US Stocks and Markets 

Comments

close Reblog this comment
Powered by Disqus · Learn more
blog comments powered by Disqus