The S&P 500 pushed back above 1,100 in September 2010, past
the 1,200 mark in early December and is already on the cusp of
1,300. With that kind of upward move, it's reasonable to feel
cautious. You want to participate in this impressive rally, but
don't want to give up big gains if the market shifts direction.
That's why defensive stocks make real sense right now. [My
colleague Tom Hutchinson
I'm not talking about low
stocks that tend to ignore market gyrations. I'm talking about
stocks with plenty of cash. Cash serves as a backstop in tough
times and a competitive weapon in good times. And no sector is
sitting on mountains of cash like the tech sector.
Surprisingly, even after this sharp upward move in the markers, a
number of tech stocks hold enough cash to account for a decent
chunk of the entire stockmarket value . The table below highlights
nine tech stocks that sport at least 25% in theirmarket value in
Will these companies go on a buying spree (either of other
companies or their own stock)? Or might they hang onto that cash to
weather any upcoming pullback in theeconomy ? Either way, it's nice
to have such options. Let's look at some of the most intriguing
cash-rich plays among these tech stocks.
A brief recap...
I've covered a few of these names in the recent past. I
has developed a misunderstood, but potentially lucrativebusiness
model as it moves away from being a dial-up Internet access
prodigiouscash flow that complements its hefty cash hoard
back in November
. Dell is still a company in search of growth (perhaps enabled by a
recent acquisition spree), but itsbalance sheet remains stunningly
strong. Cash could account for more than 40% of its
by the end of 2011.
Two more candidates
It would be awfully tempting to get behind
Comtech Telecommunications (Nasdaq:
, as this provider of satellite and microwave communications
systems remains nicely profitable even as it enters a cyclical
slump which will likely lead to a 20% drop in sales this year. But
it's unwise to spend time on stocks that lack any near-term
catalysts, and aside from a current stock buyback, there are few
timely virtues. Nevertheless, keep an eye on the M&A space.
Some investors suspect that Comtech will be a buyer or a seller in
highlights a tangible benefit that a bulletproofbalance sheet can
bring. In late December, it paid out a $3 a share one-timedividend
. And it could afford to do so several times more in coming years
if it so choose.
An intriguing small business play
My favorite name in this table is
, which is a leading player in the field of barcode scanning, right
Motorola Mobility's (NYSE:
A wide range of retailers, along with companies operating massive
warehouse/logistics operations, use these scanners to track goods
as they work though the supply chain. Thanks to the economic
slowdown, many customers decided to hold off on scanning system
upgrades, leading Intermec to post a 25% drop in sales in 2009.
Sales were flattish in 2010, but a recently rising
along with feedback from customers implies that sales could rebound
10% in 2011.
This is known as a "late-cycle play," as Intermec's customers tend
to invest more heavily in capital spending when an economic rebound
is fully underway. A bullish sign: Intermec just announced that
2010 fourth-quarter sales came in ahead of prior forecasts. The
company also announced an acquisition of Vocollect Inc., which will
enable workers to use voice commands to track goods as they move
through the warehouse. This should enable a truly "hands-free"
environment, yieldingproductivity gains in the warehouse.
Intermec also holds an interesting wildcard that may be overlooked
by many investors: The company owns a wide range of patents in the
field of radio frequency identification (RFID), which allows for
more advanced forms of asset tracking. The technology has not
supplanted barcodes as many had expected just a few years ago, but
it is starting to make serious inroads. Intermec stands to collect
hefty royalty streams if RFID becomes even more widely adopted.
Back when RFID was in the spotlight in 2006 as a key emerging
technology, Intermec'sshares hit $35. These days,shares trade for a
third of that value. A rebounding core business, an appealing new
acquisition and a potential RFID kicker could be what Intermec
finally needs to break out of its current two-year trading range.
It's hard to pin specific upside for theseshares , although a
reboundingeconomy could set the stage for a sustained double-digit
rebound in sales and even more robustprofit growth.
Action to Take -->
You can sleep better at night with these cash-rich stocks. And
although Intermec is my favorite on this list, any one of these
stocks should provide ample downside protection even if the market
-- David Sterman
P.S. -- We've just identified six surprising events that could
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Disclosure: Neither David Sterman nor StreetAuthority, LLC hold
positions in any securities mentioned in this article.
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