CHICAGO, July 29, 2011 /PRNewswire/ -- Today, Zacks
Investment Ideas feature highlights Features: Apple (Nasdaq:
AAPL), Exxon Mobile (NYSE: XOM), Carbo Ceramics
(NYSE: CRR), AeroVironment, Inc. (Nasdaq: AVAV) and
MasterCard (NYSE: MA).
(Logo:
http://photos.prnewswire.com/prnh/20101027/ZIRLOGO)
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 (Nasdaq: 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
(NYSE: 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 (NYSE: 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. (Nasdaq: 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 (NYSE: 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?
Plenty More
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.
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