Re: Biggest things you look for in a stock?
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I agree. The only time i dont' like a stock with debt is when the debt is more than its total cash.
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This shouldn't exclude buying a company's stock necessarily. What about if a company issues new debt as fast as it's paying it off but the cash and equivalents is far less than it's current debt? The truth is that the proper capital structure for a business is open to debate a lot but it is influenced by the type of business a company is in along with other factors like market share and volitility of earnings. Look at the bond ratings for the company to get a clue as to the riskiness of earnings. Debt gets favorable tax treatment, pure and simple, so it makes sense for companies to use leverage. For a discussion on how leverage can be utilized to increase earnings I refer to Damodaran's Investment Valuation opus. BTW having no debt isn't a panacea to making great investments. I've maintained for a long time that MSFT has a sub optimal capital structure and this is one of the reasons that the stock has gone nowhere for so long FWIW.
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