If you don't have any debt, you can't go broke. A simple rule, and is it any wonder that companies with no debt are so highly prized by defensive investors? Here are three businesses with virtually nil debt that all defensive investors should look at more closely.
Sirtex Medical Limited (ASX: SRX)
An unconventional 'defensive' idea, since Sirtex is usually seen as a growth stock and indeed is priced as one. Yet the company has no debt, a decent cash balance, and an essential product – liver cancer treatment – with regulatory approval in a growing number of countries worldwide. Sirtex also pays a small dividend, but there is the risk of repricing if growth slows down. It would be suitable as a smaller position in a defensive investor's portfolio.
Servcorp Ltd (ASX: SRV)
A reasonably priced virtual and serviced office provider, Servcorp has capable management and a good track record of business improvement. With a growing number of 'floors' in key cities around the world – 53 cities in 22 countries – Servcorp has improved its resilience to an economic downturn. The company was hit hard during the GFC due to relatively high fixed costs, leading to a disproportionately rapid decrease in profit. With no debt and $100 million in cash, Servcorp is suitable for the defensive investor – but be aware it does appear to be something of a cyclical business.
ASX Ltd (ASX: ASX)
The company that operates the exchange, ASX Ltd has no debt, loads of company cash, and some investments. It's priced at just above the market average, and pays a 4.2% dividend yield. With a near monopoly on financial product (shares, options, etc) trading in the Australian market, ASX has been able to leverage its dominance to increase the number of products on offer as well as diversify into other services like its BookBuild capital raising function.
Probably a cyclical business due to the fact that trading activity plunges in a downturn, there's no question of ASX Ltd going out of business, which provides a certain level of reassurance to defensive investors.
