Many investors remain on the sidelines under the impression that every company has been stopped in its tracks by the financial crisis. Somehow they've convinced themselves there's nothing worth owning.
The problem is it's just not true. Companies that carry little or no debt are kicking butt and will continue to do so even if the markets stumble.
Not only are most of them tacking on solid numbers in very volatile markets, but over time these debt-free companies are proving themselves to be stable and reliable performers.
Take last year for example. The S&P 500 returned 2%. Yet, the top 15 firms as measured by the highest amount of cash and short-term investments as a percentage of total assets returned an average of 15% according to CNBC analyst Giovanny Moreano.
That's 650% more than their debt-laden brethren over the same time frame.
So far this year, my favorite debt-free companies have tacked on average gains of 19.82% versus the S&P 500, which was up 9% as of July 3. That's a 120% advantage over the same time period.
Going further back these same companies have done even better.
In fact, my favorite debt-free choices have returned an average of 349.16% versus a loss of -3% for the S&P 500 as a whole since the top of 2007 when the financial crisis broke.
Over the past decade that number jumps to over 2,061%. And, I'll bet you dimes to Bernanke dollars that these same debt-free companies will pull ahead further in the years to come.
Debt-Free Companies Deliver
Like their financial cousins, the Dividend Royalty I write so often about, debt-free companies generally produce tremendous total returns over time.
They have damn near indestructible balance sheets that typically translate into stable cash flow, higher, more consistent yields and increasing wealth.
The comparatively high cash positions they maintain allows them the flexibility to fund acquisitions and other growth-inducing expansion plans at a time when lesser competitors are hunkering down.
Do not underestimate the impact of having such Steady Eddie's in your portfolio if you're planning for retirement or are already there.
When a company has no debt, it has every incentive to enhance shareholder wealth and none of the drawbacks that come with having to please lenders -- including bondholders -- because there aren't any.
Another added benefit most people don't recognize (but should) in today's crippled markets is that debt-free companies can restructure and shift gears quickly and efficiently, often without the interruption that comes with having to negotiate with lenders.
And finally, no-debt winners usually have low volatility which makes them ideal anchors for any savvy investor's portfolio.
Here are four of my current favorites to get you started:
The point is, there's something to own in every market - and in today's environment, low-debt no-debt companies are a great place to start.
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About the Author
Keith is a seasoned market analyst and professional trader with more than 37 years of global experience. He is one of very few experts to correctly see both the dot.bomb crisis and the ongoing financial crisis coming ahead of time - and one of even fewer to help millions of investors around the world successfully navigate them both. Forbes hailed him as a "Market Visionary." He is a regular on FOX Business News and Yahoo! Finance, and his observations have been featured in Bloomberg, The Wall Street Journal, WIRED, and MarketWatch. Keith previously led The Money Map Report, Money Map's flagship newsletter, as Chief Investment Strategist, from 20007 to 2020. Keith holds a BS in management and finance from Skidmore College and an MS in international finance (with a focus on Japanese business science) from Chaminade University. He regularly travels the world in search of investment opportunities others don't yet see or understand.