Investments Without Debt


Here are some investments without debt.

Debt.

Merri and I abhor debt.

We always have some fixer upper or improvement project going on.  We just finished converting an office building in Ecuador into three apartments.

In Florida right now… we are converting half of a large three car garage into an apartment.

Here at the farm we are adding a…

farm-work

sauna meditation room (on the right) that…

farm-work

looks into this forest canopy.

farm-work

We are building this with sustainable wood… mostly fallen trees that we reclaimed from the land.

This white oak from an old dead tree will become a great natural floor.

farm-work

This is very satisfying… to drag the logs out… mill and prepare this wood.

Here is the financial key in our minds.

We make all our improvements from cash flow. We do not have a penny of debt.  If we cannot pay for an improvement from our pockets… we do not make it.  We just wait.

I do borrow low to invest high… but this is always liquid… a form of leverage where banks pay me to borrow… not vice versa and the loan can always be paid off by the investment (unless there is a forex loss).

We never borrow to spend and we never borrow more to invest than we can afford to lose.

When it comes to investing in shares, I like companies that do not have too much debt so I was impressed by an article entitled  “15 Companies with Zero Debt”  by Giovanny Moreano & Paul Toscano.

The article said:  Throughout the financial crisis, large debt loads weighed on company balance sheets and had serious implications for the firms that let their borrowing get out of control.

Other companies, however, have a history of operating with low debt levels, and many choose to issue no debt at all. Instead of debt, these companies hold cash and liquid investments in order to make acquisitions, investments and to run daily operations.

Although too much debt can quickly turn into a problem, zero debt does not always translate to a rising stock price, as you can see from the historical data provided in the following pages. Regardless, some companies have been successful in turning their zero-debt situation into a very favorable operating model.

With data from Capital IQ drawn from the most recent quarterly statements across the S&P 500, here are 15 companies that report having no debt on their balance sheets.

Debt allows companies to grow faster in good time… but debt can be an investment’s ruin in the bad. History suggests that it will be a couple of more years before equity markets really begin to pick up and maybe seven years before we see the next boom.  Thus companies without debt have more of their hand on power and may be a good place to store purchasing power now.

Here is the list from the article mentioned above that you could use as a place to start looking for your next stock investment.

1. Google (GOOG)

Total debt: $0
Cash & ST investments: $30.059 billion
YTD stock price performance: -22.32%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, +50.17% share price
2008: $0 total debt, -55.51% share price
2009: $0 total debt, +101.52% share price

2. Apple (AAPL)

Total debt: $0
Cash & ST investments: $23.155 billion
YTD stock price performance: 19.53%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, +133.47% share price
2008: $0 total debt, -56.91% share price
2009: $0 total debt, +146.90% share price

3. eBay (EBAY)

Total debt: $0
Cash & ST investments: $4.528 billion
YTD stock price performance: -11.64%

Historical Debt and Price Levels, Per Year
2007: $200m total debt, +10.4% share price
2008: $1b total debt, -57.94% share price
2009: $0 total debt, +68.55% share price

4. Forest Laboratories (FRX)

Total debt: $0
Cash & ST investments: $3.322 billion
YTD stock price performance: -12.49%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, -27.96% share price
2008: $0 total debt, -30.12% share price
2009: $0 total debt, +26.07% share price

5. Celgene Corp (CELG)

Total debt: $0
Cash & ST investments: $2.952 billion
YTD stock price performance: -6.50%

Historical Debt and Price Levels, Per Year
2007: $219m total debt, -19.68% share price
2008: $26m total debt, +19.63% share price
2009: $25m total debt, +0.72% share price

6. Texas Instruments (TXN)

Total debt: $0
Cash & ST investments: $2.305 billion
YTD stock price performance: -4.95%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, +15.97% share price
2008: $0 total debt, -53.53% share price
2009: $0 total debt, +67.91% share price

7. Gap Inc. (GPS)

Total debt: $0
Cash & ST investments: $2.481 billion
YTD stock price performance: -11.79%

Historical Debt and Price Levels, Per Year
2007: $513 million total debt, +9.13% share price
2008: $188 million total debt, -37.08% share price
2009: $50 total debt, +56.46% share price

8. Juniper Networks (JNPR)

Total debt: $0
Cash & ST investments: $2.317 billion
YTD stock price performance: +0.07%

Historical Debt and Price Levels, Per Year
2007: $400 million total debt, +75.29% share price
2008: $0 total debt, -47.26% share price
2009: $0 total debt, +52.31% share price

9. Broadcom Corp (BRCM)

Total debt: $0
Cash & ST investments: $2.044 billion
YTD stock price performance: +17.32%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, -19.10% share price
2008: $0 total debt, -35.08% share price
2009: $0 total debt, +85.44% share price

10. Electronic Arts (ERTS)

Total debt: $0
Cash & ST investments: $1.996 billion
YTD stock price performance: -13.46%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, +15.98% share price
2008: $0 total debt, -72.54% share price
2009: $0 total debt, +10.66% share price

11. Bed Bath & Beyond (BBBY)

Total debt: $0
Cash & ST investments: $1.644 billion
YTD stock price performance: -2.56%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, -22.86% share price
2008: $0 total debt, -13.51% share price
2009: $0 total debt, +51.89% share price

12. Cognizant Tech Solutions (CTSH)

Total debt: $0
Cash & ST investments: $1.433 billion YTD stock price performance: +20.14%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, -12.03% share price
2008: $0 total debt, -46.79% share price
2009: $0 total debt, +151% share price

13. Autodesk, Inc. (ADSK)

Total debt: $0
Cash & ST investments: $1.059 billion
YTD stock price performance: +4.76%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, +22.99% share price
2008: $0 total debt, -60.51% share price
2009: $52m total debt, +29.31% share price

14. Expeditors Int’l of Washington (EXPD)

Total debt: $0
Cash & ST investments: $1.042 billion
YTD stock price performance: +14.84%

Historical Debt and Price Levels, Per Year
2007: $0 total debt, +10.32% share price
2008: $0 total debt, -25.54% share price
2009: $0 total debt, +4.51% share price

15. Novell Inc (NOVL)
Total debt: $0 
Cash & ST investments: $979.6 million 
YTD stock price performance: +48.67% 



Historical Debt and Price Levels, Per Year 


2007: $600m total debt, +10.81% share price  


2008: $126m total debt, -43.38% share price  


2009: $0 total debt, +6.68% share price

I have not yet researched any of these companies and do not know which, if any, will suit my or your portfolio.  What I do know is that these companies are in a strong position during these times of tight credit.  Investments in businesses without debt make good sense now.

Gary

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