Buy this ASX 200 share that is swimming in cash

What has happened?

The S&P/ASX 200 Index (ASX: XJO) has been under pressure this week due to the fallout from the sell-off on Wall Street. However, there are still some ASX 200 shares that are swimming in cash and offer investors a margin of safety. One such share is Fortescue Metals Group Limited (ASX: FMG).

Why is FMG a buy?

Fortescue is one of the world's largest iron ore miners. The company has a strong balance sheet with net cash of $4.9 billion as of 30 June 2023. This gives FMG a significant war chest to weather the current downturn in the iron ore market.

In addition, FMG is trading at a significant discount to its peers. The company's shares are currently trading at a price-to-earnings (P/E) ratio of just 5.5x. This is well below the average P/E ratio of 10x for the ASX 200. This is the cheapest it has been since 2020.

What are the risks?

Of course, there are always risks associated with investing in any company. In the case of FMG, the biggest risk is a sustained downturn in the iron ore market. However, given the company's strong balance sheet and low valuation, the risk-reward ratio is skewed in favor of investors.

Is FMG a buy?

In my opinion, FMG is a buy at the current price. The company has a strong balance sheet, is trading at a significant discount to its peers, and has a long history of generating strong cash flow. While there are always risks associated with investing in any company, the risk-reward ratio is skewed in favor of investors in the case of FMG.