Stock Picker: Company Cash is King

Andrew Fisher
Thursday, 18 Sep 2008 | 12:47 PM ET

Finding cheap stocks in a downdraft isn't hard. Finding valuable stocks can be. David Pearl has a simple formula for stepping back from the fray and pinpointing the potential winners.

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"The framework one should look at is companies that are very profitable," the head of U.S. equities for Epoch Investment Partners told CNBC. "If they generate cash, they're going to do very well, even in a downturn. That cash means they can never go out of business -- and when their stock is down, they buy it back, or buy a competitor very cheaply."


"Davita is an example," he said. "When you provide services to the chronically ill, if you lose kidney function, you need to be dialyzed three times a week for the rest of your life, so they have very stable revenue -- which translates to great free cash flow, and that cash pays down any debt and buys back shares."

Your Best Trades Now
Finding value plays, with Mary Jane Matts, Fifth Third Asset Management and David Pearl, Epoch Investments


Disclosure information for David Pearl was not immediately available.


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