With cracks developing in the overall bull market thesis, investors may want to target cash rich stocks to buy. Under normal circumstances, having a high cash load isn’t exactly what investors usually seek. After all, a massive war chest suggests that an enterprise isn’t being productive with its financial resources.
On the other hand, stocks with high cash reserves may be ideal under ambiguous circumstances. For example, the headline print shows that the labor market continues to be robust. However, the unemployment rate increased conspicuously in May. Also, job seekers are taking a longer time overall to land employment.
In addition, the enterprises undergirding financially stable stocks enjoy greater flexibility, just in case the smelly stuff hits the proverbial fan. On the opposite end of the spectrum, heavily indebted firms just don’t have the mobility to navigate trying headwinds. Given the uneasy nature of the current market, you may find these safe stocks confidence-inspiring.
Power Integrations (POWI)
Based in San Jose, California, Power Integrations (NASDAQ:POWI) is a leading innovator in semiconductor technologies for high-voltage power conversion. According to its corporate profile, Power Integrations’ products represent key building blocks in the clean-power ecosystem, enabling both renewable energy generation and efficient transmission of power. Since the start of the year, POWI gained nearly 28%.
Financially, Power runs true to its name, featuring a stout balance sheet. Primarily, the company benefits from a zero-debt profile, enabling greater flexibility. As of the first quarter of 2023, the company features a cash and cash equivalents account of $94.2 million. Also, its marketable securities account comes out to $264.4 million. Notably, total liabilities at the end of Q1 came out to $89.1 million. Plus, with the company consistently posting positive free cash flow, it’s one of the cash rich stocks to buy.
Finally, Power features a three-year revenue growth rate (on a per-share basis) of 16.5%, above nearly 63% of the semiconductor industry. Thus, it’s one of the stocks with high cash reserves that can also continue marching higher.
CoStar Group (CSGP)
A leading provider of commercial real estate information, analytics, and online marketplaces, CoStar Group (NASDAQ:CSGP) may be one of the most cynically relevant ideas among cash rich stocks. Fundamentally, CoStar features a wealth of online services. You might not know the CoStar name but you have almost surely heard about domains like Apartments.com, ApartmentFinder.com, and FoRent.com. Sure enough, since the Jan. opener, CSGP gained just over 15%.
Finally, one of the company’s core strengths centers on its balance sheet. Presently, it carries a cash-to-debt ratio of 4.61, ranked better than 82.15% of its peers. Nominally, CoStar at the end of Q1 2023 posted a cash and cash equivalents amount of $5.06 billion. In contrast, total liabilities amount to only $1.55 billion. Therefore, if the you-know-what hits the fan, CoStar can still trudge on. That makes for a compelling case for financially stable stocks.
Operationally, CoStar is no slouch either. Its three-year revenue growth rate clocks in at 12.8%, ranked better than 71.28% of sector rivals. Also, it features a trailing-year net margin of 16.32%, beating out 65.8% of competitors.
Billed as one of the largest global providers of fuel, Cameco (NYSE:CCJ) attempts to ease the fact that the fuel it’s really talking about is uranium. Frankly, I don’t blame management one bit. While nothing comes close to the energy density associated with nuclear power facilities, let’s be real: the industry suffers from a serious reputational challenge. Still, Cameco ranks among the cash rich stocks to buy thanks to its reliability and relevance.
Further, its financial prowess can’t be denied. Notably, Cameco sports an Altman Z-Score of 5.05 and a Piotroski F-Score of 8 (out of 9). Respectively, these stats indicate that the enterprise incurs low bankruptcy risk and enjoys high business efficiency. Looking at its balance sheet, Cameco features a cash and cash equivalents amount of $1.03 billion. Generally speaking, the energy firm benefits from consistent FCF, though it got wobbly in 2020 for obvious reasons.
Since the beginning of the year, CCJ gained nearly 31% so it might be a tad overheated. However, for the longer term, I think it’s one of the safe stocks to consider.
Admittedly, a precious metals-related enterprise might not be the first thought for cash rich stocks. However, Franco-Nevada (NYSE:FNV) deserves consideration for two reasons. First, ongoing concerns about an incoming recession might make the fear trade relevant. Second, Franco-Nevada features a royalty and streaming structure. Since it’s not a direct mining enterprise, the company benefits from greater predictability.
Plus, Franco-Nevada is not only one of the low-debt stocks but it’s actually a no-debt security. Unsurprisingly, it also posts an astronomical Altman Z-Score of 72.48, indicating extremely low bankruptcy risk. Looking at the balance sheet, the royalty and streaming firm features a cash and cash equivalents amount of $1.25 billion. In contrast, total liabilities tally up to only $215 million. Again, even if some messy stuff were about to go down, FNV represents one of the stocks with high cash reserves.
Operationally, Franco-Nevada prints a three-year revenue growth rate of 16.2%, beating out 62.4% of its peers. Also, its trailing-year net margin impresses at a whopping 53.85%.
Encore Wire (WIRE)
A leading manufacturer of a broad range of electrical building wire products, Encore Wire (NASDAQ:WIRE) focuses on everything from commercial/industrial buildings to individual homes to apartment complexes and even manufacturing housing. Further, Encore prides itself in maintaining a high level of customer service with low-cost production and the addition of new products that complement its current product line. Thanks to its pertinent business, WIRE ranks as one of the cash rich stocks to buy.
As with many other financially stable stocks on this list, Encore suffers no debt. As well, it features an equity-to-asset ratio of 0.91 times, outflanking 97.31% of its peers. Its Piotroski F-Score of 7 out of 9 indicates decent operational efficiency while its Altman Z-Score of nearly 16 suggests almost zero chance of imminent bankruptcy.
Looking at its balance sheet, Encore posts a cash and cash equivalents amount of $697 million. Its total liabilities amount to only $183 million. Further, its consistently positive and robust FCF – again, excepting the wobbliness in 2020 – makes WIRE one of the safe stocks.
Epsilon Energy (EPSN)
Headquartered in Houston, Texas, Epsilon Energy (NASDAQ:EPSN) is a North American on-shore focused independent oil and natural gas company. According to its website, Epsilon engages in the acquisition, development, gathering, and production of oil and gas reserves, primarily operating in Pennsylvania and Oklahoma. Due to the rough energy market, EPSN slipped nearly 17% so far this year. Still, it’s one of the cash rich stocks to consider.
Basically, as social dynamics normalize, demand for hydrocarbons should rise – and perhaps rise significantly. Even if it takes some time, Epsilon commands stout financials. For example, its cash-to-debt ratio pings at 90.53 times, ranked above 82.77% of its peers. Also, its equity-to-asset ratio clocks in at 0.84 times, above 86.92% of the competition.
Not only that, Epsilon carries a Piotroski F-Score of 8 and an Altman Z-Score of 5.56. With its operational efficiency and fiscal stability, it’s probably not going anywhere anytime soon. Therefore, it’s one of the low-debt stocks you can count on.
Full Truck Alliance (YMM)
Hailing from China, Full Truck Alliance (NYSE:YMM) arguably represents the riskiest idea for cash rich stocks on this list. Per its corporate profile, Full Truck is a leading digital freight platform, connecting shippers with truckers to facilitate shipments across distance ranges, cargo weights, and types. Further, the company provides a range of freight matching services including freight listing service, freight brokerage service, and online transaction service.
Glaringly, YMM lost more than 26% of its equity value since the Jan. opener. However, because China’s economy is steadily recovering, YMM could be an underappreciated idea. Trading at only 1.51 times tangible book value, one could make the case that it’s also undervalued.
As for the topic at hand, Full Truck features a cash-to-debt ratio of 363.14 times, ranked better than 85% of its peers. Also, its equity-to-asset ratio pings at 0.92 times, better than 96.1% of the competition. Combined with an Altman Z-Score of 10.74, YMM could make some significant noise for intrepid contrarians.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.