Zacks Investment Ideas Feature Highlights: MasterCard, Check Point Software Technologies, Bed Bath & Beyond and Apple

News provided by

Oct 05, 2011, 09:30 ET

CHICAGO, Oct. 5, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: MasterCard (NYSE: MA), Check Point Software Technologies (Nasdaq: CHKP) and Bed Bath & Beyond (Nasdaq: BBBY) and Apple (Nasdaq: AAPL).

(Logo: http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)

4 Companies with Rock-Solid Balance Sheets

Corporate America is sitting on a ton of cash right now. The latest figures from the Federal Reserve have the number pinned somewhere north of $2 trillion.

Cash now accounts for 7.1% of total company assets, the highest percentage in nearly half a century.

While all of that idle dough isn't doing the economy - or shareholders - much good at the moment, it does provide a nice cushion for companies if times get tough. And considering Europe's fiscal mess and all of the negative sentiment pervading the markets right now, some tough times may indeed be right around the corner.

Debt Free

Having a stash of cash is nice in case of an emergency, but it's even better to be free of any debt obligations. Don't get me wrong, having a capital structure with some debt can be a good thing if business is humming along (particularly at today's low rates). But if things turn south, those interest payments still have to go out the door, and that can spell trouble if a company is overleveraged.

Financial leverage is a double-edged sword that can work for or against a company. If business is good, returns are amplified and more money falls to the bottom line. But if business is slow, losses are amplified and cash flow suffers.

The same concept applies to personal finance. When low interest rates and lax credit standards drove home prices to irrational exuberance, owners who borrowed the most and were leveraged to the hilt profited greatly. But when the house of cards came crashing down, overextended borrowers were taken to the cleaners.

Financial Flexibility

Another benefit for companies with a mountain of cash and no debt obligations is the flexibility to take advantage of opportunities that often arise in bear markets.

These companies have the resources to not only buyback their own stock at attractive prices, but possibly acquire a competitor or capitalize on other investments for pennies on the dollar without going to the costly debt or equity markets in order to fund their purchases.

4 Financially Sound Companies

Listed below are 4 companies with tons of cash and no long-term debt.

While they may not be earning much of a return sitting on so much dough, they're in a great position to make some smart acquisitions, invest in value-added projects, buyback stock, pay out a juicy dividend, or survive an Armageddon-like downturn.

MasterCard (NYSE: MA)

% Cash & Securities to Total Assets: 40%
Long-term Debt: $0

MasterCard is a cash machine. The company has ridiculously high profit margins, very low capital investment requirements and carries no debt, building more and more cash each month.

MasterCard has been using its cash recently to return value to shareholders. In the first half of 2011, MasterCard spent over $1 billion buying back approximately 4.1 million shares of its own stock.

Check Point Software Technologies (Nasdaq: CHKP)

% Cash & Securities to Total Assets: 71%
Long-term Debt: $0

Headquartered in Tel Aviv, Israel, Check Point provides its customers with IT security solutions. It also provides its shareholders with financial security. Over 70% of Check Point's assets are in cash and securities, and the company has no debt obligations.

As a software company, Check Point's margins are high, its capital expenditures are low, and its cash flow is strong. This has freed the company to spend a significant chunk of its cash buying back stock. In the second quarter of 2011, Check Point spent over 40% of its operating cash flow buying back 1.38 million shares of its stock. It has plenty of room to continue doing so.

Bed Bath & Beyond (Nasdaq: BBBY)

% Cash & Securities to Total Assets: 34%
Long-term Debt: $0

Bed Bath & Beyond has managed to thrive despite a difficult consumer environment. The company has also managed to thrive without the use of debt.

With its strong free cash flow and pristine balance sheet, Bed Bath & Beyond has decided to invest in itself. The company has spent nearly all of its operating cash flow year-to-date buying back stock. That's one way to grow EPS.

Apple (Nasdaq: AAPL)

% Cash & Securities to Total Assets: 71%
Long-term Debt: $0

As of June 25, Apple boasted cash and securities of more than $82 per share, or $76,000,000,000. That's more than the U.S. Treasury had on hand at the end of July. No joke.

While many speculate on how and when Apple will use this enormous mountain of cash, the company continues to pile up the dough quarter after quarter. It pays no interest to anyone and currently does not pay a dividend and is not buying back stock, and it seems to have no plans to. With a balance sheet built like Fort Knox, Apple should be able to weather almost any storm for years to come.

The Bottom Line

While hoarding cash may draw scorn from politicians and shareholders now and then, sometimes it's best for businesses to play it safe. If a recession is indeed looming, investors don't have to worry about any of these companies filing for bankruptcy.

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.

Then when changes are discovered, they're applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock picking system; the Zacks Rank, continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros. In short, it's your steady flow of profitable ideas GUARANTEED to be worth your time. Get your free subscription to Profit from the Pros at: http://at.zacks.com/?id=7298

Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
[email protected]
http://www.zacks.com

SOURCE Zacks Investment Research, Inc.