3 Zero-Debt Stocks to Buy for Stability and Growth


  • Here are three zero-debt stocks to buy now.
  • Paccar (PCAR): Its DNA is growing profits. 
  • Encore Wire (WIRE): Its products are in wide demand. 
  • Interactive Brokers Group (IBKR): It’s a controlled company. That’s a good thing.
Zero-Debt Stocks - 3 Zero-Debt Stocks to Buy for Stability and Growth

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I’ve been a fan of zero-debt stocks for a while. 

Some might argue that companies with zero debt on their balance sheets aren’t optimizing their capital structures for growth. Others might consider these businesses to have fortress-like balance sheets. I would be in the latter group. 

Fortune recently discussed how the federal government’s debt problem could lead to Americans losing their homes, spending power, and even national security. 

“The group believes debt could lead to reduced public spending, private investors losing faith in America’s economy, a shrinking window of prosperity for U.S. families thanks to worsening housing and job markets, and a threat to national security,” Fortune reported the sentiment of the Peter G. Peterson Foundation, which focuses on fiscal solutions for the country.

Not everyone considers the debt problem catastrophic to America’s debt problem. There’s an argument to be made that the more important question is whether it’s getting a sufficient return on the debt it undertakes. 

The same argument applies to public companies. If they have debt, are they getting a sufficient return on it? Companies that make big, splashy acquisitions add billions of debt to their balance sheets. Often, the return on investment isn’t there. 

However, a business with zero debt on its balance sheet is less likely to make ill-advised acquisitions that boost revenues and little else. 

I like these zero-debt stocks. 

Paccar (PCAR)

A sign for Paccar (PCAR) in front of greenery.
Source: VDB Photos / Shutterstock.com

Paccar (NASDAQ:PCAR) builds large trucks under the Kenworth, Peterbilt and DAF brands. Its products keep America’s economy rolling. Its stock is up more than 11% year-to-date (YTD) and 130% over the past five years, 52% better than the S&P 500

At the end of January, Paccar reported its Q4 2023 results. They included record revenue and net income of $35.13 billion and $4.60 billion, respectively, in its business’s truck and parts aspect. The financial services revenues in 2023 were $1.81 billion, generating $540.3 million in financial services income before taxes. 

“PACCAR’s excellent results reflect record deliveries of premium quality DAF, Peterbilt and Kenworth trucks worldwide, record Truck, Parts and Other gross margins and strong financial services performance,” stated CEO Preston Feight in its Q4 2023 press release. 

Amazingly, Paccar has generated 85 consecutive years of income growth, ensuring that healthy dividends continue to be paid. 

Technically, Paccar isn’t a zero-debt stock. That’s because its financial services business finished the fourth quarter with $15.93 billion in financial services liabilities, covered by more than $17 billion in finance receivables.

If you look at its Q3 2023 10-Q, of its $16.23 billion in finance receivables, less than 1% are 31 days past due or greater. Its receivables situation is very healthy. 

The primary business saw its pre-tax income grow by 53% in 2023, to $4.89 billion, with zero debt and $8.7 billion in cash, while its financial services pre-tax income grew 8.3% to $540.3 million.

What’s not to like?

Encore Wire (WIRE)

a picture concept of network cables
Source: Shutterstock

Encore Wire (NASDAQ:WIRE) provides cable and wire products to many industries, including renewable energy, data centers, residential and commercial construction and industrial companies. Its stock is up more than 7% year-to-date and 283% over the past five years, 3.6x better than the S&P 500. 

In December 2022, I included Encore in seven small-cap stocks to buy for 2023. The company’s copper and aluminum wire and related products were just getting going despite being in business since 1989.

It reported Q4 2023 results on Feb. 13. While volumes were up for the quarter and the year, revenues were down year-over-year due to lower selling prices. Gross margins dropped 11.4 percentage points in 2023 to 25.5%. That decline translated into a 46% drop in EBITDA (earnings before interest, taxes, depreciation and amortization).

It continues to focus on increasing its capacity with internally generated cash flow. The company expects to spend nearly $400 million between 2024 and 2026 on capacity expansion. It finished 2023 with no debt and $561 million in cash and cash equivalents on its balance sheet. 

Its balance sheet is a fortress.

Interactive Brokers Group (IBKR)

Source: Shutterstock

Interactive Brokers Group (NASDAQ:IBKR) is a tech-driven brokerage firm that provides stocks, options, futures, currencies, bonds, funds, cryptocurrencies and more investment products in 34 countries and more than 150 market centers to institutional and individual investors. 

IBKR stock is up nearly 26% YTD and 83% over the past five years. That’s slightly better than the index and more than double the return of Charles Schwab (NYSE:SCHW), America’s largest online broker. 

Of the 11 analysts that cover its stock, nine rate it a Buy, with a target price of $106, slightly higher than where it’s currently trading. Analysts are likely being conservative given higher interest rates. 

The company finished 2023 with net revenue of $4.34 billion, 42% higher than a year earlier, with net income of $2.81 billion, 53% higher year-over-year. 

You’ll notice that only $600 million of the net income is available to shareholders. That’s because founder and Chairman Thomas Peterffy holds 75.5% of the company’s votes through his IBG Holdings LLC holding company, which owns all Class B shares controlling IBG LLC. This holding company owns Interactive Brokers and its various businesses. 

Interactive finished the fourth quarter with no debt and $3.75 billion in cash and equivalents on its balance sheet. 

On the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.

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