For Immediate Release
Chicago, IL – July 29, 2011 – Today, Zacks Investment Ideas feature highlights Features: Apple (AAPL), Exxon Mobile ( XOM), Carbo Ceramics ( CRR), AeroVironment, Inc. (NasdaqGS:AVAV - News) and MasterCard ( MA).
Debt Is for Suckers
Policy makers in Washington D.C. have the stock market, and global economy for that matter, fixated on the U.S. debt ceiling. We are all aware of the problem. The U.S. can't borrow any more money unless it raises the maximum amount of debt it is allowed to carry. If it doesn't we default, basically.
Our nation's reliance on debt has been going on for decades. On the individual level, we have seen debts from credit cards to mortgages spiral out of control, contributing to the worst recession in most people's life time.
Need vs. Want
Until the recent turmoil, people and our nation had no trouble going into debt up to our eyeballs to buy things we "needed". But that has quickly changed. So are companies the same way?
Debt can be good for a company. It allows earnings to be spread around to fewer investors, compared to equity. But that leverage comes with additional risk. You don't owe shareholders anything, but you do owe your creditors. And if you don't pay, you are in trouble.
It is a balance of risk/reward that goes back to the dawn of time. But, in this cycle of deleveraging, why shouldn't we focus on companies that don't have to cater to creditors?
No Debt, No Worries
You can argue that not taking debt may be limiting a company’s growth prospects, but in this skittish economy, I'll gladly take a company with a clean balance sheet over one that essentially living paycheck to paycheck. Save the risk taking for another time.
4 Stocks that Don't Need a Debt Ceiling
I almost don't want to include it because the story has been beaten to death. But the fact that Apple (AAPL) is on pace to become the biggest company in the world is a fascinating story. And to do that with no debt? That is just outstanding. Comparatively, the current king of the hill, Exxon Mobile ( XOM), carries billions in debt and doesn't show a fraction of the growth prospects of the revolutionary tech-gadget company. No need to elaborate on AAPL, you all know the story there.
But how about Carbo Ceramics ( CRR)? The earnings outlook for this Zacks #2 Rank (Buy) just keeps getting better and better, and they don't need to borrow money for the growth.
Carbo supplies ceramic proppants used by natural gas and oil drillers. In just the past 3 months, the full year consensus estimate for this year jumped 98 cents, to $5.37. A 56% growth rate. Next year's estimates are up $1.26, to $6.94 for another 29 percentage points of growth.
Any volatility in the energy sector can be weathered easily because they can use their revenue on operations and growth, rather than paying off the bill collectors.
AeroVironment, Inc. (AVAV) is another example. The company that makes unmanned aircraft and energy systems operates with a zero in the long-term debt column.
Shares are currently a Zacks #2 Rank (Buy) and are expected to grow steadily at 11% per year through fiscal 2013. Estimates keep rising and you won't have to take out a loan to pick up this stock. AVAV trades with a PEG ratio of 1.1, meaning the growth is priced at a solid value.
Ironically MasterCard ( MA) doesn't have any debt, well no long-term debt. They do more than just offer credit cards, like but that is what they are best known for.
Estimates for this Zacks #2 Rank (Buy) just keep moving higher and are now projecting a 21% growth rate this year. Earnings should growth another 18% in 2012. Shares are also trading with a PEG of 1.1, showing some value. The company reports earnings next week. Could it be the sixth consecutive surprise?
These are just a few of the many companies out there that operate with a debt-free balance sheet. You can argue that they might be missing out on even higher growth rates, but I'd say the sense of security is worth it.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Len Zacks. The company continually processes stock reports issued by 3,000 analysts from 150 brokerage firms. It monitors more than 200,000 earnings estimates, looking for changes.
Then when changes are discovered, they’re applied to help assign more than 4,400 stocks into five Zacks Rank categories: #1 Strong Buy, #2 Buy, #3 Hold, #4 Sell, and #5 Strong Sell. This proprietary stock picking system; the Zacks Rank, continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter Profit from the Pros. In short, it’s your steady flow of profitable ideas GUARANTEED to be worth your time. Get your free subscription to Profit from the Pros at: http://at.zacks.com/?id=7298
Follow us on Twitter: http://twitter.com/ZacksResearch
Join us on Facebook: http://www.facebook.com/ZacksInvestmentResearch
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
More From Zacks.com