Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Travelers Companies Inc (TRV), General Electric Company (GE): Cash Lovers, Buy These Dow Stocks

Page 1 of 2

The Dow Jones Industrial Average consists of 30 of the finest businesses in America. But within this elite group, you’ll find some Dow stocks outperforming the others. Today, we’ll take a look at the richest cash-flow margins on the Dow.

Profit Margins for the Dows Strongest Cash Creators | Create infographics.

The first thing you’ll notice here is that the widest cash margins don’t always go hand in hand with strong earnings performances. Travelers Companies Inc (NYSE:TRV) and General Electric Company (NYSE:GE) both rank in the bottom half if you rank the Dow by net income margins, and the situation isn’t much improved by switching to operating profits or EBIT income margins. Both companies operate much like big banks, which goes a long way toward explaining the spread between their cash flows and net margins.

General Electric Company (NYSE:GE)

Deferred and amortized policy acquisition costs play a large role in insurance giant Traveler’s cash statements, and the company doesn’t worry about capital expenses. You wouldn’t expect an insurance firm to build factories or pump billions into capital infrastructure projects, now would you? (There are a few notable exceptions, of course.)

General Electric Company (NYSE:GE)’s last four quarters included $4.5 billion of non-cash bottom-line deductions to account for expected credit losses, as well as $2.5 billion in “other operating activities.” Those “other” activities largely deal with “adjustments to current and noncurrent accruals and deferrals of costs and expenses, adjustments for gains and losses on assets and adjustments to assets.” Walking further down General Electric Company (NYSE:GE)’s cash statement, you’ll also find the industrial conglomerate making $22 billion from investing activities, a number that absolutely dwarfs the $14 billion in free cash flows.

In short, these are the kinds of things you’d expect a financial wrangler to get into, like a major bank or perhaps a hedge fund. GE Capital is, after all, the company’s largest and most profitable division, any way you slice it.

Microsoft Corporation (NASDAQ:MSFT) and Pfizer Inc. (NYSE:PFE) run far more traditional business models, selling and licensing their inventions. Their operations are built around the high-margin concept of monetizing their research and development departments. Their large cash piles are a byproduct of their highly profitable core operations, but those aren’t major profit centers for either company. Neither Pfizer Inc. (NYSE:PFE) nor Microsoft Corporation (NASDAQ:MSFT) even reports a financial division along the lines of GE Capital. Microsoft’s $41 million in trailing net interest income is laughable next to its $7.6 billion of operating income, and Pfizer actually pays more interest on its loans than it makes from investments.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!