The Daily Workshop Report
by Robert Sheard (TMF Sheard)

LEXINGTON, KY. (May 8, 1997)

Last week, Tom Gardner and I both wrote about his Cash-King Investing approach, which focuses on the most powerful companies, with terrific balance sheets, in order to reduce the amount of time, anxiety, and costs required to develop a long-term, market-thrashing approach.

Today I'd like to look at some of the criteria Tom referred to and apply them to two of the premiere technology companies in the world to see how they stack up. Cash-King Investing is partly subjective, of course, requiring that you be aware of the strongest brand names out there. But unless you willfully try to ignore the business world, it's fairly easy to identify the powerhouses.

With roughly 90% of the microprocessor market, INTEL <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq:INTC)") else Response.Write("(Nasdaq:INTC)") end if %> can't be described as anything but a behemoth. It's the fourth-largest company in America and has been an amazing growth story. But does it stack up to Tom's Cash-King tests?

At the end of 1996, Intel was sitting on a hoard of $4.165 billion. Its current assets totaled $13.684 billion. Its current liabilities, however, were only $4.863 billion. And long-term debt, the real killer for lots of technology companies? A piddling $728 million.

Now a company that cash-strong may just be so conservatively managed that the stock goes nowhere, right? Well, let's see. Over the past five years, the S&P 500 has grown at an annual clip of 15%. Intel's stock is up a whopping 63% a year. Not conservative returns at all, just a thrashing of the industry and market, a typical Cash-King powerhouse.

The other technology bellwether is, of course, MICROSOFT <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %>. The dominant software company (and sixth-largest American company overall), Microsoft has been another boon to long-term technology investors, averaging 35% a year for the past five years.

How does it look on the cash-king scale? At the end of 1996, Microsoft coffers contained $6.94 billion in cash and current assets tallied $7.8 billion. On the other side of the ledger, current liabilities only totaled $2.4 billion and the company doesn't have a nickel of long-term debt. Voila! Another Cash-King candidate.

It might be fun and profitable to run down the list of the largest technology stocks in the Nasdaq 100 and see how many of them stack up well on the Cash-King scale. The joy of finding one of these beauties is that you can hold it for such a long period and ignore the short-term mania we sometimes fall prey to (I'm guiltier than most). Fool on!

Monthly Growth Screens
(Jan. 3 to present)
25.17%  Relative Strength  
9.65%  S&P 500 Index  
8.05%  Low Price/Sales  
7.10%  YPEG Potential  
-2.23%  Investing for Growth  
-11.29%  Unemotional Growth  
-12.68%  EPS Plus RS  
-20.31%  Formula 90  

Annual Value Screens
(Jan. 1 to present)
12.82%  Dogs of the Dow  
10.67%  Dow Jones Ind Avg  
7.13%  Beating the S&P  
2.72%  Unemotional Value  
2.72%  Beating the Dow  
1.89%  Dow Combo  
-4.03%  Foolish Four