FYI: After the first down year for U.S. stocks in a decade—and a quick snapback so far in 2019—it’s a good time for investors to re-evaluate which kinds of stocks they want in their portfolios. One good bet: companies with low debt.
Companies that haven’t borrowed too much are perfectly positioned for an environment of slowing economic growth and elevated macro risks. Low or—better yet—zero debt brings financial flexibility and fewer worries about the ability to pay it off if the business hits a rough patch.
Stocks of firms with low debt have outperformed those with higher debt by about one percentage point a year for the past 25 years, according to Barron’s calculations. Low debt companies are also less volatile than the overall market, on average. Over the past few years, though, investors have been rewarding financial aggression more than financial discipline. Companies with more debt have outperformed their more conservative peers by about 10% since the middle of 2015.
Regards,
Ted
https://www.barrons.com/articles/when-it-comes-to-picking-stocks-buying-companies-with-low-debt-looks-like-a-winning-strategy-for-2019-51548464570?mod=djem_b_Weekly Feed for Barrons Magazine
