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Amazon and Facebook as defensive plays? Yes, along with these other stocks that are cash-flow …

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If we’re heading into a time of increased risk in the stock market, investors might be well-served by owning shares of companies that not only generate a lot of cash, but also grow that money rapidly.

Below are two lists of large companies that have shown the highest free-cash-flow growth rates over the past three and five years.

A rapid pace of economic growth is generally a good thing for stock investors. But we’re in a period of unusually aggressive policies by the Federal Reserve to spur that growth. These policies have included a federal funds rate with a target range of zero to 0.25% and a continual increase in the central bank’s holdings of U.S. Treasury securities and mortgage-backed bonds. But with increasing inflation, the Fed may act sooner than previously expected to quell price increases — and that could lead to an uncertain period for stocks.

Read: Fed takes baby steps toward scaling back its bond purchases

Three-year cash-flow winners

Many professional investors emphasize cash flow when analyzing companies. Earnings can be a tough nut because there are so many one-time noncash items that can affect a company’s bottom line. A company can also book revenue while it is waiting to be paid — this means it shows a profit for selling something even though the cash hasn’t been received.

Berkshire Hathaway CEO Warren Buffett has explained the importance of cash flow in his annual letters to shareholders, including the 2020 letter, when he wrote that the company’s insurance businesses had an important industry advantage: “Overall, the insurance fleet operates with far more capital than is deployed by any of its competitors worldwide. That financial strength, coupled with the huge flow of cash Berkshire annually receives from its non-insurance businesses, allows our insurance companies to safely follow an equity-heavy investment strategy not feasible for the overwhelming majority of insurers.”

To identify large, stable companies growing their cash flow most quickly, we looked at free cash flow data provided by FactSet and compound annual growth rates (CAGR) for three and five years.

A company’s free cash flow is its remaining cash flow after planned capital expenditures. It is money that can be deployed to expand the business, make acquisitions, buy back shares, raise dividends or for other corporate purposes.

A blind focus on the highest free-cash-flow CAGR would have the problem of highlighting companies that had unusually low cash flows for the beginning period. So for the three-year free-cash-flow CAGR ranking we began with the 50 companies in the S&P 500 Index
SPX,
-0.01%

with the highest free cash flow for calendar 2017, and then ranked them by FCF CAGR for three years through 2020. We used calendar years because many companies have fiscal years that don’t match the calendar.

The largest company on the list of 50 was Apple Inc.
AAPL,
-0.13%
,
which had $52.91 billion in free cash flow in calendar 2017. The company’s free cash flow increased to $80.22 billion in 2020, for a three-year CAGR of 14.9%. But Apple didn’t make the top 10 list for 2003 — it was ranked 14th. More about Apple below.

Here are the 10 S&P 500 companies from the list described above with the highest free-cash-flow CAGR for three years through 2020. The annual data is in millions of dollars:

You can scroll the table to see how each company’s free cash flow increased or declined over the past three years. The CAGR calculation only uses the 2020 and 2017 year-end numbers.

Amazon.com Inc.
AMZN,
+0.03%

was way out in front for three-year FCF CAGR through 2020 among the 50 companies in the S&P 500 with the highest FCF at the end of 2017. You can see below that it ranked second on the five-year list.

For three years, Verizon Communications Inc.
VZ,
-0.87%

ranked second, with CVS Health Corp.
CVS,
-1.01%

in third place.

CVS underlines the imperfection of any one-point stock screen. The company made the three- and five-year lists because of the increase in cash flow from its transformative acquisition of Aetna in November 2018. After a few more years, it will be interesting to see how rapidly the combined company is able to grow its cash flow from a 2019 baseline.

After the five-year list, there are more comments about companies that made the top 10 for both periods.

Five-year cash flow winners

For the five-year free-cash-flow CAGR ranking we began with the 50 companies in the S&P 500 Index with the highest free cash flow for calendar 2015, and then ranked them by FCF CAGR for three years through 2020.

During calendar 2015, Apple had the highest free cash flow of $63.37 billion among S&P 500 companies. That’s much higher than the company’s $52.91 billion in FCF in 2017. It also explains why the company’s five-year FCF CAGR through 2020 was only 4.8% and why its three-year CAGR was so much higher at 14.9%. This illustrates the importance of seeing the data for each year, even though the CAGR calculations only make use of the starting and ending data points.

Here are the five-year CAGR winners, including the FCF figures for six years that you can see if you scroll the table:

Facebook Inc.
FB,
+0.98%

is the five-year winner, increasing its free cash flow to $23.63 billion in 2020 from $6.08 billion in 2015 for a CAGR of 31.2%. The company was ranked 19th for three-year FCF CAGR.

Amazon ranked second for five-year CAGR and was one of several companies making both the five- and three-year top-10 lists:

  • CVS ranked sixth for five years and third for three years because of its 2018 acquisition of Aetna.

  • Google holding company Alphabet Inc.
    GOOG,
    +0.23%

    GOOGL,
    +0.17%

    ranked third for five years with a CAGR of 20.8% and seventh for three years with a CAGR of 21.5%.

  • UnitedHealth Group Inc.
    UNH,
    +0.21%

    ranked fourth for five years with a CAGR of 19.7% and ninth for three years with a CAGR of 20.2%.

  • AbbVie Inc.
    ABBV,
    -0.98%

    ranked fifth for five years with a CAGR of 19.1% and eighth for three years with a CAGR of 21.2%.

  • Home Depot Inc.
    HD,
    +0.46%

    ranked seventh for five years with a CAGR of 16.7% and 10th for three years with a CAGR of 19.2%.

  • Intel Corp.
    INTC,
    -0.28%

    ranked 10th for five years with a CAGR of 12.6% and fifth for three years with a CAGR of 26.9%

As explained above, any stock screen based on one element has its limits. It is very important to do your own research and form your own opinion before committing to any investment.

Don’t miss: Amazon is a cheap stock for long-term investors. These numbers tell you why.

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How to prepare your Facebook account for your digital afterlife

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Today, our online lives are where we share a lot of private and personal information, especially on social media platforms where we share many of our thoughts, post photos and videos over the time we have spent online. Among these social media platforms, Facebook is the most used social media service today. A lot of us, our friends and our family members have a Facebook account. We post and share everything from our private photos to a personal message via Facebook.

But have you wondered what happens to your Facebook account and the information (like posts, comments, photos, videos, etc.) that you have created and accumulated on the service after your time?

■ What will happen to my account?

■ Who can access your profiles?

■ Who will own your account and data?

■ How to manage it when such a time comes?

Facebook has added features to your account so that you can decide what happens to your account when such a time arises. Follow the steps given below to set it up and ensure that the information in your Facebook accounts is handed over to someone else safely or managed according to your choice.

Setting up Facebook’s legacy contact:

In the case of Facebook, you can choose to memorialise your account and hand over the control to a ‘Legacy contact’ of your choice or altogether delete your profile after your time.

Step 1: To set up your legacy contact, you can visit the ‘Settings & privacy’ option under your profile and select the ‘Memorialisation settings’ under ‘General Account settings’. You can also sign in to your account and visit https://www.facebook.com/settings to access this setting.

Step 2: Now, you can choose a legacy contact in this setting by searching for and adding a friend from your account as your legacy contact. Do note that, once memorialised, the legacy contact can only moderate the posts on your page and not post on your behalf.

Step 3: The following setting is to choose whether to allow your legacy contact to download all your data that you have created or shared on your Facebook account like posts, photos, videos etc.

Step 4: The final setting on this page could be considered an alternative to choosing a legacy contact. This setting is to delete your complete Facebook account once you pass away. Facebook needs to be informed about your death and requires verifying it with valid documentation to activate this feature. The company will delete all your information on Facebook on completion of this process.

To know more about these settings, you can visit the FAQ page on legacy contact.

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Big EU lawsuit against Facebook morphs into 3-year ‘partnership’ with complainants

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Three years ago, a group of EU consumer agencies launched a multi-country lawsuit against Facebook, accusing the social media giant of having illegally harvested the data of millions of users.

More than 300,000 angry Facebook users positioned themselves behind the collective action suit, which promised to award them individual monetary damages if the company was found guilty of wrongdoing.

On Friday, those lawsuits quietly morphed into a brand new partnership with Facebook.

Euroconsumers, the umbrella organization behind the Spanish, Italian, Belgian and Portuguese lawsuits, announced they were entering a partnership with the company focused on the “safety and privacy” of Facebook users.

The move comes after POLITICO reported that Euroconsumers had settled its lawsuit with Facebook at the end of April — and highlights the fact that collective action lawsuits rarely make it over the finish line in Europe, sheltering companies from the type of action that can produce crippling damages in U.S. courts while leaving consumers with little recourse.

Originally, Euroconsumers had told people who joined the case it would seek compensation of €200 for every Facebook user whose data was mishandled.

In the end, though, there will be no court decision, no admission of wrongdoing by Facebook and no direct payment from the company to consumers as a result of the settlement, according to Euroconsumers.

Instead, the consumer groups and Facebook said they were forming a joint committee focused on three priorities: sustainability, digital empowerment and fighting scams. The issue of privacy — which was the explicit focus of the lawsuit — is the “umbrella” under which the thee priorities fall.

As for the consumers, they are being promised a vague consolation prize.

The four consumer groups said they would commit to “reward” consumers who joined the original lawsuit with “a package to help consumers be safe online” — but no hard cash.

Asked whether Facebook had paid money to Euroconsumers in the settlement, the group declined to comment. POLITICO reached out to Facebook, but the company didn’t give an immediate response apart from the press release.

Meanwhile, the committee isn’t committed to producing any specific results.

“There are specific initiatives in the making, but there will also be a consumer reporting channel. We will able to report problems that emerge, like feedback from our members,” said Els Bruggeman, head of policy at Euroconsumers.

A spokesperson for the group said: “It’s the moment to try to influence the reasoning from companies who are managed far away.”

Legally speaking, though, the heat is off Facebook.

The consumer groups will evaluate their collaboration in three years.

“An agreement for one year would be too short. Three years is long enough to be able to evaluate. There will be a lot of changes in the digital world in that period,” added the spokesperson.

In the meantime, a change in legislation may give future collective action lawsuits in Europe more teeth: A directive finalized late last year could lead to bigger pan-European collective redress cases.

Want more analysis from POLITICO? POLITICO Pro is our premium intelligence service for professionals. From financial services to trade, technology, cybersecurity and more, Pro delivers real time intelligence, deep insight and breaking scoops you need to keep one step ahead. Email [email protected] to request a complimentary trial.

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Russian watchdog demands that Facebook delete post insulting WWII veterans

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MOSCOW, May 29. /TASS/. Russia’s Federal Service for Supervision of Communications, Information Technology, and Mass Media (Roskomnadzor) demanded that US company Facebook delete an Instagram post that insults the memory of World War II veterans, the watchdog said on its website on Friday.

“Roskomnadzor has sent a letter to Facebook Inc top management, demanding that content insulting the memory of World War II veterans be deleted,” the watchdog said. “The governmental agency found the unlawful post on the Instagram social network, owned by Facebook.”

According to Roskomnadzor, publication of clearly offensive information that insults Russia’s military glory and memorable dates, or desecrates military glory symbols, or offends WWII veterans constitutes a criminal offense in Russia and is subject to criminal proscution.

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