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By Michael Tsang and Alexis Xydias

Dec. 8 (Bloomberg) -- Stocks have fallen so far that 2,267 companies around
the globe are offering profits to investors for free. That's eight times as
many as at the end of the last bear market, when the shares rose 115 percent
over the next year.

Bank of New York Mellon
Corp.<http://www.bloomberg.com/apps/quote?ticker=BK%3AUS>in New York,
Danieli
SpA <http://www.bloomberg.com/apps/quote?ticker=DAN%3AIM> in Buttrio, Italy
and Seoul-based Namyang Dairy Products
Co.<http://www.bloomberg.com/apps/quote?ticker=003920%3AKS>hold more
cash than the value of their stock and debt as the slowing world
economy wiped out $32 trillion in capitalization this year. Companies in the
MSCI World Index
<http://www.bloomberg.com/apps/quote?ticker=MXWO%3AIND>trade for an
average $1.17 per dollar of net assets, the lowest since at
least 1995, and 39 percent sell at a discount to shareholder equity, data
compiled by Bloomberg show.

The cash-rich companies allow investors to pay nothing for future earnings
streams, providing opportunities to buyers concerned about deflation,
according to Jean-Marie
Eveillard<http://search.bloomberg.com/search?q=Jean-Marie+Eveillard&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>,
whose $16 billion First Eagle Global Fund has beaten 98 percent of
competitors this year. Microsoft
Corp.<http://www.bloomberg.com/apps/quote?ticker=MSFT%3AUS>and Novo
Nordisk A/S <http://www.bloomberg.com/apps/quote?ticker=NOVOB%3ADC>, which
generate the most money compared with debt, can expand even if lower
consumer demand erodes profits.

"Cash is king, not necessarily for the investor but for corporations,"
Eveillard said in an interview from New York last week. His
fund<http://www.bloomberg.com/apps/quote?ticker=SGENX%3AUS>holds both
Microsoft and Namyang
Dairy <http://www.bloomberg.com/apps/quote?ticker=003920%3AKS>. "It's useful
to sit on a ton of cash, No. 1 to survive, as opposed to going bankrupt, and
No. 2 to seize opportunities either to make acquisitions cheaply or to
squeeze competitors."

Falling Prices

Stocks plunged this year after almost $1 trillion in bank losses and
writedowns froze credit markets and pushed the U.S., Europe and Japan into
the first simultaneous recessions since World War II. The 40 percent
drop<http://www.bloomberg.com/apps/quote?ticker=SPX%3AIND>in the
Standard & Poor's 500 Index is the steepest since 1931, while the MSCI
World's <http://www.bloomberg.com/apps/quote?ticker=MXWO%3AIND> 45 percent
plummet is the biggest since the gauge started in 1970.

The slump left prices in the global measure at 1.17 times companies'
so-called book value, or assets minus liabilities, on Nov. 20, the lowest on
record, data compiled by Bloomberg show.

The MSCI World climbed 2.8 percent at 8:40 a.m. in London, while S&P 500
futures advanced 2.6 percent after U.S. President- elect Barack
Obama<http://search.bloomberg.com/search?q=Barack+Obama&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>pledged
the biggest investment in the nation's infrastructure since the
1950s to stimulate the economy.

Stagnating growth is heightening the risk of deflation. In the U.S.,
consumer prices plunged 1 percent in October, the biggest drop since records
began in 1947. They may slow next year by the most since 1983, squeezing
earnings, according to the International Monetary
Fund<http://www.imf.org/external/datamapper/index.php>in Washington.

'Good Cash Flow'

Businesses with reserves will be cushioned from insolvency and may even
benefit from deflation because buying power and the value of dividends
increase as prices retreat, said Arlene
Rockefeller<http://search.bloomberg.com/search?q=Arlene%0ARockefeller&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>,
chief investment officer for global equities at State Street Global
Advisors, which oversees $1.7 trillion.

"You want stocks with good cash flow and are self-funding," Rockefeller said
in an interview last week. "This is an opportunity for companies that are
large and that do not have a lot of debt to go out and acquire other
companies to gain market share."

The firm's SSgA Disciplined Equity
Fund<http://www.bloomberg.com/apps/quote?ticker=SSMTX%3AUS>held shares
of BNY Mellon, the world's largest
custodian <http://www.bloomberg.com/apps/quote?ticker=BK%3AUS> of financial
assets. The bank had $24 billion in so-called negative enterprise value, or
the amount of cash that exceeds the value of its shares and debt. The stock
climbed 24 percent since Nov. 20, when the S&P 500 fell to an 11-year low,
outpacing the index's 16 percent gain.

BNY Mellon, Danieli

BNY Mellon is among 49 companies with a market capitalization greater than
$1 billion that hold more cash than the value of their stock and debt, out
of 2,267 overall, data compiled by Bloomberg show.

Danieli, Italy's biggest maker of equipment for the steel industry, has
$1.49 billion in cash <http://www.bloomberg.com/apps/quote?ticker=DAN%3AIM>,
or almost 40 percent more than the combined value of its shares and debt
after a 73 percent stock plunge this year, Bloomberg data show.

Just 276 companies had cash that exceeded the value of their stock and debt
when the S&P 500 bottomed in 2002. Those shares posted a median total return
of 115 percent over the next 12 months, according to data compiled by
Bloomberg. That's more than triple the return for the S&P 500 during the
same span.

Of the 50 largest companies in the Dow Jones Stoxx 600
Index<http://www.bloomberg.com/apps/quote?ticker=SXXP%3AIND>of
European companies, Novo
Nordisk <http://www.bloomberg.com/apps/quote?ticker=NOVOB%3ADC>, the world's
biggest insulin maker, is one of two whose cash exceeds debt by four times.

Novo Nordisk Chief Financial Officer Jesper
Brandgaard<http://search.bloomberg.com/search?q=Jesper+Brandgaard&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>said
on Oct. 30 that the Bagsvaerd, Denmark-based company is earmarking as
much as $2 billion for
takeovers<http://www.bloomberg.com/apps/quote?ticker=NOVOB%3ADC>in the
next 12 months as the financial crisis forces biotechnology companies
to seek buyers. The company has $1.35 billion and generated $1.83 billion in
free cash flow in the first three quarters of 2008.

'Going to Win'

"The ones that are going to win are those that can generate cash," Horacio
Valeiras<http://search.bloomberg.com/search?q=Horacio+Valeiras&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>,
who oversees $11.2 billion as chief investment officer at Nicholas Applegate
Capital Management in San Diego, said in a telephone interview last week.
His Nicholas Applegate International Growth
Fund<http://www.bloomberg.com/apps/quote?ticker=NACIX%3AUS>bought
shares of Novo in the third quarter, data compiled by Bloomberg show.
The stock has since gained 8.5 percent, while the Stoxx 600 slumped 26
percent.

Eveillard at First Eagle increased his fund's position in
Microsoft<http://www.bloomberg.com/apps/quote?ticker=MSFT%3AUS>,
the world's biggest software maker, by 83 percent to 8.16 million shares
last quarter.

Microsoft, Apple

The Redmond, Washington-based company is one of only two in the S&P 500 with
cash and marketable securities worth more than $20
billion<http://www.bloomberg.com/apps/quote?ticker=MSFT%3AUS>and less
than $2 billion in debt, according to data excluding financial
firms compiled by Bloomberg. Apple Inc., the Cupertino, California-based
maker of iPhones and Macintosh computers, is the other.

Microsoft and Apple outperformed the MSCI
World<http://www.bloomberg.com/apps/quote?ticker=MSFT%3AUS>since its
low on Nov. 20, posting advances of 13 percent and 17 percent,
respectively.

Eveillard's fund is also the biggest overseas shareholder of Namyang Dairy,
which has no debt
<http://www.bloomberg.com/apps/quote?ticker=003920%3AKS>and $270
million in cash. The cash pile is 44 percent higher than the value
of its shares. Reserves at the company, one of South Korea's biggest
dairies, account for 65 percent of its $418 million in so-called tangible
book value, a measure of shareholder equity that excludes assets that can't
be sold in liquidation.

"Cash provides a break against a potential catastrophe," said Eveillard. "At
the end of the day, cash is still worth 100 cents on the dollar."

That helps explain why investors have rushed to
Treasuries<http://www.bloomberg.com/apps/quote?ticker=USGG10YR%3AIND>this
year. Yields on three-month Treasury bills fell to 0.01 percent last
week as investors paid a premium for the safest, most liquid assets. The
level was the lowest since 1940, according to monthly figures compiled by
the Federal Reserve.

Private Equity

One reason so many cash-rich companies are available now is because
leveraged buyout firms such as Henry
Kravis<http://search.bloomberg.com/search?q=Henry+Kravis&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>'s
KKR & Co. and Blackstone Group LP have been hamstrung by the credit crunch,
according to Tom
Rozycki<http://search.bloomberg.com/search?q=Tom+Rozycki&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>at
Principal Global Investors, which held shares of Danieli.

Private-equity deals fell more than 70 percent from last year's record $727
billion as banks stopped funding takeovers, Bloomberg data show. The $43
billion buyout of energy producer TXU Corp. by KKR and TPG Inc. in 2007 was
the biggest ever.

"You don't wish for this kind of environment, but it's nice to have private
equity out of the way so we can get some of these
bargains<http://www.bloomberg.com/apps/quote?ticker=SPX%3AIND>too,"
Rozycki, who helps oversee $2 billion from Des Moines, Iowa, said in
an interview from New York last week.

The Principal MidCap Blend
Fund<http://www.bloomberg.com/apps/quote?ticker=PEMGX%3AUS>,
which he helps manage, has beaten 92 percent of competing funds this year.
"For the longest time, a lot of these companies had premiums in them because
people were pointing around at who's going to be acquired next."

'Nothing Wrong'

Many stocks are cheap because investors doubt their reported asset values
and ability to generate enough earnings to survive, said Sergi
Martin<http://search.bloomberg.com/search?q=Sergi+Martin&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>,
who oversees $9 billion as chief executive officer at Credit Andorra's
Credit Invest asset management unit in Andorra La Vella, Andorra.

"You have to screen very selectively for companies that will survive, and
not for future corpses," Martin said in a telephone interview last week.
"There will be more bankruptcies, and where valuations are absurd and there
is nothing wrong with the company, time will correct that."

Grahame 
Exton<http://search.bloomberg.com/search?q=Grahame+Exton&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>,
a money manager at Tilney Private Wealth Management in Liverpool, England,
says clients want the margin of safety provided by reserves.

"We have always been paid to look for cash generators," said Exton, whose
firm had $9.9 billion under management at the end of September. "I just
think that now people will put a greater emphasis on them."

To contact the reporters on this story: Michael
Tsang<http://search.bloomberg.com/search?q=Michael+Tsang&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>in
New York at
[EMAIL PROTECTED]; Alexis
Xydias<http://search.bloomberg.com/search?q=Alexis+Xydias&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>in
London at
[EMAIL PROTECTED]
*Last Updated: December 8, 2008 03:45 EST*

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