Editor’s note: Amid today’s hype-fueled market environment, many investors often forget something important…

Cash matters for a business. And how the business is producing that cash is a big deal…

To that point, today we’re sharing a classic essay from Joe Austin on the subject. Longtime readers might recognize this essay. It first appeared in the June 20, 2025 edition of the Chaikin PowerFeed. But Joe’s message is just as important today as ever…

Cash Is Still King

By Joe Austin, senior analyst, Chaikin AnalyticsInvestors have collectively forgotten… cash is king.

Think back to the boom of the dot-com mania.

You probably remember the chaos of that era. Waiters were quitting their jobs to trade stocks.

I was a tech analyst at the time. And people were accosting me at cocktail parties to pitch ideas.

Back then, I had a front-row seat of the bubble. I was working on a team that managed more than $14 billion for institutional clients and some of New York’s wealthiest families.

And I had an unusual assignment. I needed to find tech stocks with enormous long-term potential… andspot the bad companies that had no business being listed on the market.

In other words, I had to find the likes of Google and Amazon – the real winners. But I also had to avoid companies that would lose everything.

Pets.com is one of the most famous examples of the latter…

The online pet-supply retailer never turned a profit. But when it went public, it raised a staggering $82.5 million. And it went out of business nine months later.

So, I followed my assignment. It all came down to looking at one thing – cash…Recommended Links:

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‘Real Cash’ Matters

Now companies often “hide” their real numbers. They use “financial engineering” to mislead the public.

When you look at a company’s quarterly earnings report, it can be 100 pages long. And it’s full of accounting gibberish… So it can be confusing.

But it turns out that you only need to know one thing – how much real cash the company produces.

For every dollar the company takes in, how much pure cash does it generate after paying off all its expenses?

Sometimes a big infusion of cash can come from a one-off event – like if Apple (AAPL) suddenly sold its entire iPad business, for example.

But that kind of cash flow isn’t “repeatable.” It gets included in earnings, but it’s not going to happen again.

What you want is consistency.

You want a company converting almost 100% of its earnings into cash – what I call “cash conversion” – quarter after quarter.

You want that no matter what the company is selling – whether it’s AI, gold, oil, medicine, clothing, and so on.

I’ll also note that using this kind of metric made me very unpopular with certain company-management teams back in the ’90s…

If I attended the lavish dinners they threw for wealthy investors, they would signal their bankers or PR folks to escort me out to the street – and close the door in my face.

Companies wanted to woo institutional investors like me because we had a lot of money to invest.

But in my case, I asked a lot of uncomfortable questions.

You see, I had developed a way to tell which of the high-flying stocks in a boom or a breakthrough sector had the potential to return hundreds of percent… survive the busts and all the subsequent bear markets… and become household names.

Meanwhile, I could also tell which stocks were doomed to crash and disappear.

And it was all based on that core concept – cash is king.

It was true in the ’90s. And it’s still true today.

Good investing,

Joe Austin

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Editor’s note: On Tuesday, February 17, Joe is joining our founder Marc Chaikin for a special event…

During the event, they’ll discuss an important indicator that relates to this “cash is king” concept. And they’ll explain how it’s all connected to a massive moneymaking opportunity ahead…

In short, it can help point to which AI and other breakthrough stocks still have true potential to soarthis year.

Get more details and register to attend this free event here.

Market View

Major Indexes and Notable Sectors  # HLD:    BULLISH    NEUTRAL    BEARISHDow 30

-0.11%917 4S&P 500

-0.02%123292 82Nasdaq

+0.27%2452 24Small Caps

-0.45%639938 309Bonds

-0.53%Energy

+2.61%913 0

— According to the Chaikin Power Bar, Small Cap stocks and Large Cap stocks are  Bullish. Major indexes are mixed.*  *  *  *

Sector Tracker

Sector movement over the last 5 daysEnergy+4.07%Information Technology+3.51%Utilities+3.51%Materials+3.33%Real Estate+3.23%Industrials+3.22%Consumer Staples+1.62%Health Care+0.14%Communication-0.05%Consumer Discretionary-1.95%Financial-2.26%*  *  *  *

Industry Focus

Software & Services77753

Over the past 6 months, the Software & Services subsector (XSW) has underperformed the S&P 500 by -22.67%. Its Power Bar ratio, which measures future potential, is Very Weak, with more Bearish than Bullish stocks. It is currently ranked #21 of 21 subsectors.Indicative StocksABTCAmerican Bitcoin CorAGYSAgilysys, Inc.ZSZscaler, Inc.*  *  *  *

Top Movers

GainersGNRC+17.93%SNDK+10.65%MU+9.94%SW+9.9%UHS+8.71%LosersCBRE-12.24%LDOS-11.15%HOOD-8.91%AIZ-8.65%CRL-8.42%*  *  *  *

Earnings Report

Earnings SurprisesSW 
Smurfit Westrock Plc Q4 $0.28 Missed by $-0.22TMUS 
T-Mobile US, Inc. Q4 $2.41 Beat by $0.41GFS 
GlobalFoundries Inc. Q4 $0.55 Beat by $0.08THC 
Tenet Healthcare Corporation Q4 $4.70 Beat by $0.63EQIX 
Equinix, Inc. Q4 $3.37 Missed by $-0.51*  *  *  *

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