jeudi 20 septembre 2018

Debt-free stocks

Debt is often necessary. But too much debt will sink you, like it will sink your favorite business. And if it doesn't sink it, it's at least gonna be a stress factor which you don't need. 

Because there's enough sources of stress in life, such as death that's slowly creeping towards us and that's gonna reach us sooner or later.

I already have problems to sleep without a significant stress in life (outside of life itself), I don't need some worrying shit about one of my stocks. I want to think about something else than my stocks when I sleep. I want to think about death or diseases that's gonna affect me or my family.

Free-debt stocks are often expensive. Again, there's a reason why a stock is expensive. It's either because the entire market is crazy about a stock, because the stock is very predictable, because it's full of money or because it has no debt (there may be a couple other reasons, but here's some of the most frequent).

A company without debt has a lot of flexibility. It can do whatever it wants with it's cash flow. It doesn't have to worry about a recession, a rise of interests, the possibility of an acquisition that would be impossible if the company carried too much debt. And on it goes.

So, here's a list of 12 of these debt-free or almost debt-free stocks (some have big debts in absolute numbers, but VS the market cap of the company or the cash they hold, it's unsignificant):

Richelieu Hardware (RCH.TO)
Enghouse Systems (ENGH.TO)
Ulta Beauty (ULTA)
Intuit (INTU)
Edwards Lifesciences (EW)
Five Below (FIVE)
Google/Alphabet/Whatever (GOOG)
Robert Half (RHI)
Simulation Plus (SLP)
Texas Roadhouse (TXRH)
Facebook (FB)
Ross Stores (ROST)

All great fucking stocks. So, debt free, such as low beta seems to be a criteria on which we could almost base our decisions without thinking about the rest. 

That's what we're all looking for ultimately: A one criteria-decision tool. We're all so fucking lazy.

3 commentaires:

  1. It is a good corrolary from the previous post and Angelo’s previous comment. A way to mitigate the risk in these turbulent time is while remaining invested in growth stock is to look at depth free stocks. Like Richelieu, the first company listed on this post

  2. I'm really struggling to understand this market. America wants trade wars and they are raising interest rates. Meanwhile, the market is making new highs. This is not going to end well.
    As an example, take a stock that you think would be immune from trade wars: National Beverage sells soft drinks and sparkling water in America. They are debt free and cash rich. They do not export to the world (or hardly at all, anyway). You think: great! a consumer stock immune from the insanity of trade wars. Guess what? their profit margins are down recently because of the cost of aluminum getting higher in America (thanks to Trump's tariffs on Canada and the world with respect to aluminum and steel). More and more companies will get hit with higher cost of goods and less sales (and if they have debt, higher cost of servicing their debt). With the market trading at historically high p/e multiples and making all time new highs...what will happen to growth stocks with big multiples that STOP GROWING?

    Step 1 is turning from growth stocks to extreme value stocks (ideally, ones that are cash rich and debt free)

    Step 2 may be having at least 10% or 20% in cash.
    I want to see these trade wars resolved before I can be fully invested again (but I'm not holding my breath).

  3. Net Debt free usually does correlate to low volatility and higher valuations coupled with growth. Lots of good names mentioned above.