Stock Quotes in this Article: ACN, ATVI, FLR, EXPD NWSA

BALTIMORE (Stockpickr) -- While most investors spend the week jawing over the upcoming Twitter (TWTR) IPO, you can take some solace from knowing that the biggest gains come from something a little less exciting: cash.

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That may seem like a strange combination. After all, cash is supposed to be a drag on your portfolio, not a performance booster.

But you don't have to take my word for it; over the last decade, the top tier of cash-rich stocks worldwide generated total returns of 297%. That's triple what the S&P 500 earned over the same period. Yes, cash is still king this year.

Part of that stellar outperformance has to do with what cash enables companies to do. Capital gains are great, but historically speaking, the majority of portfolio growth comes from other sources. Dividends, share buybacks, and debt repurchases all inject value directly into your shares, and on a year-to-year basis, they also account for around 50% of annual stock performance. Only companies with cash that have the wherewithal to boost those payouts on command.

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In short, cash provides options. Firms with cash can opt to increase shareholder value by paying a dividend or initiating a share buyback. Plus, they have the ability to take advantage of pricey M&A opportunities and internal investments.

Lots of companies have big cash positions right now. In fact, more than 25% of the S&P 500's valuation is made up of the record cash holdings on corporate balance sheets. That means that it pays to be a little more selective with which companies you consider cash-rich.

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To do that, we'll focus on firms that fit the tight set of quantitative criteria that beat the S&P by a factor of three. Today, we'll take a look at five of them.


Consulting giant Accenture (ACN) has been quietly stashing cash in 2013. Today, the firm caries a net cash balance of $5.61 billion on its balance sheet, enough to pay for more than 11% of the firm's outstanding shares at current price levels. That huge cash cushion significantly reduces the risks in shares of ACN right now.

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Accenture is one of the biggest consulting and technology services firms in the world. For that, the firm counts 96 of the world's 100 biggest companies among its clients, with a geographic footprint spanning 50 countries around the globe. In a nutshell, Accenture exists to help its clients make more money -- its experts are tasked with squeezing out extra efficiency from businesses, coming up with new revenue sources, integrating technology and outsourcing services. Because Accenture's work is deeply integrated into customers' businesses, those clients are very sticky. Most of the firm's biggest customers have been with the firm for more than a decade.

As a service company, Accenture sports a low overhead model. That means that the firm is able to collect huge margins for its efforts so long as it stays on the right side of the business cycle (i.e., not paying hefty salaries to consultants who aren't serving clients). Historically, ACN has prioritized returning capital to shareholders; with a huge cash reserve in place, shareholders can expect to see more of it in 2013.

Activision Blizzard

Up next is video game maker Activision Blizzard (ATVI). This isn't the first time I've talked about in the context of cash-rich stocks. Shares are up almost 50% since I suggested shares back in January. But with $4.3 billion in net cash still on the books, this stock isn't looking expensive yet.

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Activision Blizzard owns some of the most popular video game franchises in the world, with names like Call of Duty, World of Warcraft and Diablo under its umbrella. Unlike most video game publishers, ATVI's model is built on subscriptions to multiplayer games such as World of Warcraft more than one-time console game sales. With WoW, for instance, some 8 million subscribers pay a monthly fee to play the game online with other players in real time. That subscription component provides ATVI with recurring, high margin revenues.

Those revenues are sticky too -- and because gamers have a massive sunk cost in building characters and attaining status, they're a lot less likely to switch to a competing franchise and restart the process. As I write, Activision Blizzard's cash amounts to more than 23% of its market capitalization, around $3.73 per share. Investors should look past the rally in shares this year before they miss the next leg of it.


$12 billion engineering and construction firm Fluor (FLR) has positioned itself in some attractive industries for the years ahead. The firm is a major participant in infrastructure building for the oil and gas sector, as well as for the global industrial sector. As both of Fluor's key business areas see green shoots in 2013, the firm should be able to pull off another consecutive year of stair-step growth.

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FLR isn't most investors' idea of a cash-rich company. The engineering and construction business is capital intense, which means that few of the firm's peers have the fortress balance sheet that Fluor does. That's a huge advantage right now in spite of the relatively low market returns that FLR earns on its $1.6 billion net cash holdings. It means that FLR is better equipped to pursue growth through acquisitions in the year ahead.

That huge cash position also reduces some of the risks coming from customers such as the U.S. government. With members of Congress trying to out-dumb themselves with the government shutdown this fall, that cash goes a long way in reducing uncertainty.

News Corp.

Media behemoth News Corp. (NWSA) has been undergoing some major changes in the last year and change. For starters, the firm shed its entertainment business, spinning it off into 21st Century Fox (FOX) while retaining its publishing business. The "new" News Corp. owns Wall Street Journal parent Dow Jones, as well as a bigger business in U.K. and Australian newspapers.

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The transformation of NWSA is a jarring change, but it'll probably be looked at as a good one in the end. Exposure to partially-owned TV carrier Foxtel and online real estate classified provider REA Group in Australia provide interesting growth prospects for News Corp. while its core newspaper businesses continue to keep the lights on. Other acquisition targets should provide a better peek at NWSA's strategy going forward; the firm's $2.56 billion in net cash should provide it with enough dry powder for a meaningful purchase.

A collection of well-established brands provide some semblance of an economic moat for NWSA, particularly here in the U.S., where the firm's Dow Jones unit earns substantial subscription revenue from businesses that are more or less indifferent to the tiny costs. FOX may have gotten the interesting side of News Corp.'s business, but interesting and profitable investments don't always overlap.

Expeditors International

While 2013 has been a pretty lackluster year for Expeditors International (EXPD), things have really heated up in the last six months. Since April, shares of EXPD have rallied more than 20%, compared with an 8% gain from the S&P 500. And that momentum isn't showing many signs of letting up this fall.

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Expeditors International is a third party logistics firm that specializes in helping customers transport freight internationally through its network of airlines and ship carriers. Almost half of Expeditors' revenues come from add-on services such as customs brokerage, providing a welcome source of wide margins without hurting shipping rates. Firms are spending more time than ever focusing on tightening up their logistics --by hiring EXPD, they spare themselves the hassle and knowledge gap of shipping efficiently.

Much of EXPD's success comes from its IT systems. The firm's network helps match the most-efficient carrier solutions for shippers, trimming costs and removing some of the human factors from the equation. A massive $1.3 billion net cash position in EXPD's balance sheet means that the firm can pay for around 15% of its outstanding shares in cold, hard cash. For a third-party logistics firm, that's a very nice safety net.

To see these value-centric names in action, check out the Cash Rich Buys October 2013 portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.


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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to

TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji