With the yield curve inverted, and the Fed still on the rate-raising path, cash is king these days. That can also apply to companies that have relatively large amounts of liquidity.
Several years ago I created a screen for times like this. It identifies companies that hold significant levels of cash and short-term investments. This search is very simple: Profitable U.S. companies that have at least a third of their market cap in cash and short-term investments. There are less than three dozen qualifiers, and just four of those have market caps in excess of $1 billion.
Perhaps the most interesting name is the largest: engineering and construction company Fluor Corp (FLR) , which sports a $4.4 billion market cap. Fluor is certainly not a household name, and it is cyclical; after being in the red between 2019 and 2021 (two of the three were "Covid years"), the company was profitable again in 2022.
FLR is dripping with liquidity, to the tune of more than $2.6 billion in cash and short-term marketable securities. Backing out total debt of $1.13 billion leaves net cash and marketable securities of nearly $1.5 billion, or $10.50/share. The company has reduced total debt by $593 million since year-end 2018. FLR currently trades at 13-times and 12-times 2024 and 2035 consensus earnings estimates respectively.
The company no longer pays a dividend; it was eliminated in 2020 during Covid. The company does, however, have a stock repurchase plan in place. Although it has not bought back any shares since 2018, there are 10.5 million shares remaining on its current repurchase authorization, and there's plenty of cash to work with.
Shares are down 8% year-to-date, and have pulled back 18% since March 1 on little news, other than the March 14 announcement of the sale of its AMECO South America business.
Unfortunately, there are not a great deal of other interesting names the make the cut. I do see sum-of-the-parts name NL industries NL, which yield and has $139 million in net cash ($310 million market cap), but NL's story is complicated.
One other familiar name here is Park Aerospace (PKE) , which is a member of the current vintage my Triple Net Active Versus Passive Portfolio. PKE (up 16% year-to-date) ended its latest quarter with $103 million, or just over $5 share in net cash, and yields 3.92%.
Retailer CATO Corp (CATO) also graces the list; the fashion retailer ended its latest quarter with $146 million or $7.34/share in net cash. CATO closed at $8.93 on Tuesday. Last month, this serial stock repurchaser, which has reduced shares outstanding by 28% since year-end 2017, increased its current repurchase authorization by a million shares, bringing the total to 1.135 million shares.
I'll have to dig a little deeper into this search to see if there are any other potential diamonds in the rough.
