Tilson and co-manager Glenn Tongue note that McDonald's ( MCD) is also a cash generator, partly because of the way it depreciates company-owned property on which it earns a steady flow of franchise fees.

Whitney Tilson likes Berkshire Hathaway (symbol BRK.B for Class B shares) because it's "safe, cheap and rapidly growing." Its operating businesses throw off mountains of cash for investment maestro Warren Buffett to allocate. Berkshire Hathaway reported stellar quarterly earnings a month ago, Tilson said, as its U.S. insurance units rebounded from the 2005 hurricanes Katrina and Rita.

With Microsoft ( MSFT) overhauling Windows, Office and its server software in 2007, the duo think Wall Street grossly underestimates the software giant's earning power. "Shares of Microsoft are undervalued, Tilson added. They do not adequately reflect the company's $36 billion stock-repurchase program or the lift to earnings from the release of Windows Vista, the newest version of the company's operating system. "It's a no-brainer," Tilson said.

Wal-Mart’s stock fell slightly during the month and is at the same level first reached eight years ago, as the business continues to struggle amidst weak sales – in fact, Wal-Mart’s U.S. same-store sales, at 3%, were the lowest in 26 years in both 2005 and 2006. The poor results are due in part to external factors such as weakness in the housing market and high gas prices, which have hit Wal-Mart’s low- and moderate-income customers particularly hard, but the company’s problems are deeper. It has made many mistakes – but, fortunately, ones that are fixable we think, which is why we remain enthusiastic about the stock. We believe earnings per share have to potential to grow at a high single digit or low double digit rate and, at 16x this year’s earnings estimates and only 14.5x next year’s, there’s also room for multiple expansion.

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