GT Blog June 25, 2009

An interesting item in the Globe Report on Business today - Number Cruncher - Steve Ladurantaye produced a list of TSX listed issuers with high cash positions. The implications here is that lots of cash is a good thing because of the possibility of increased dividends and or share buybacks. Onex is apparently sitting on a cash hoard of about $18 per share so at the current $20 you only pay $2 for all of their operating enterprises

Other cash rich issuers are Fairfax Fin, Celestica, Transat AT, Aecon, AGF Mgt, Westjet, Atco, BMO, Sun Life, Manulife, Hudbay, Power Corp and Magna

Now before you even think about buying these gems you have to ask - why all the cash? I have found that cash rich companies can be poor investments because too much cash relative to the working assets can be a sign of a dying company that investors are using as a piggy bank

Share buy-backs are a good way for shareholders to loot the treasury

I once thought of Onex to be a growth company - and now I am not too sure - so here is the acid test - if over the next few months management puts the cash to work growing the company I want to own the stock - if management does a share buyback run away and let the stock languish for another ten years

To Grow or to shrink - that is the question