The First Cut: Cash-Rich Firms

by John Bajkowski

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The First Cut is designed as a starting point for investors. Each issue we list the top 30 stocks that pass relatively simple screens of interest to individual stock pickers. AAII’s Stock Investor Pro screening software is used to generate the First Cut listing.

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With the credit market markets squeezed, cash is once again king. A firm has a better chance of weathering an economic storm while funding research and development, buying back shares, enticing buy-out offers, or even acquiring other companies with a large cash position. But excess cash has it disadvantages. For instance, it reduces profit margins when it earns a lower rate of return than other assets in the firm.

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