Generally, it’s taken as a given that companies that are cash cows and the exchange traded funds (ETFs) that hold these companies are in a good position for an economic recovery.
Cash is always a good thing to have, but when considering these companies, one must always keep in mind the amount of debt it holds, or how leveraged the company is, states Gary Gordon for ETF Expert. Highly leveraged companies may be forced to feed their debtors with any excess cash.
Gordon cautions that “cash on hand” shouldn’t be viewed in a vacuum, though. Some cash-rich companies are saddled with doubt, while others spent their cash unwisely.
But taking into account those factors, Gordon says, one still can’t discount the strength of large-cap tech stocks. Some of these include Google (GOOG), Intel (INTC), Microsoft (MSFT), Cisco (CSCO) and Apple (AAPL).
If you want to grab exposure to these companies, take a look at the PowerShares QQQ (QQQQ), which is one the easiest and most efficient ways to grab exposure to a range of companies. It’s down 5.5% year to date; AAPL is 10.6%; CSCO is 3%; GOOG is 4.7%; MSFT is 4.9%; INTC is 2.5%.
Another possibility is the iShares Goldman Tech Index Fund (IGM), which is down 4% year to date; INTC is 5.3%; MSFT is 6.6%; CSCO is 6.5%; GOOG is 6.1%; AAPL is 6.1%.
Finding cash-rich companies is a mere starting point, though. We suggest that you do your homework, watch the trend lines and have a strategy when entering a market.
Kevin Grewal contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.