Invest Like the Mafia

It seems that if we're not besieged by bad news of a possible bankruptcy for U.S. auto giant General Motors (NYSE: GM  ) , then we're suffering through the continued struggles of banks like Citigroup (NYSE: C  ) . Let's face it, this is a brutal market for investors.

And when we look at most of the companies that are having the biggest problems, one common trait leaps out at us: Debt.

Companies loaded down with borrowed money simply don't have a lot of maneuverability during recessions, because they have to pay the piper come hell or high water. And if they don't, well, in most cases the piper takes the company, chops it up, and sells off the pieces.

But maybe we can learn a little something from Italy's Mafia. Organized crime is not only lucrative, but also highly cash-based. That means that while many companies around the world are struggling under the weight of bank loans, Mafia-owned companies are flush with cash. As Bloomberg recently put it, they're "breezing through economic hard times."

Want to get in on some of that Mafioso debt-free action without actually having to become part of La Cosa Nostra? Take a gander at this set of companies. Each (entirely unaffiliated-with-organized-crime) company below has produced a return on equity of more than 10%, suggesting that it's a quality business, and each has no debt to speak of. All of them have also been given high ratings by The Motley Fool's CAPS community.

Company

Return on Equity

CAPS Rating (max 5)

Intuitive Surgical (Nasdaq: ISRG  )

17.4%

****

Ctrip.com (Nasdaq: CTRP  )

25.3%

****

Titanium Metals (NYSE: TIE  )

12.7%

*****

Texas Instruments (NYSE: TXN  )

13.4%

****

Forest Laboratories (NYSE: FRX  )

22.4%

*****

Source: CAPS and Capital IQ, a division of Standard & Poor's, as of May 27.

Now, a lack of debt doesn't guarantee that business will be all lollipops and unicorns for these companies, but it does mean that none of them have creditors standing by ready to snuff them out like Michael Corleone coming down on Virgil Sollozzo. If you'd like to learn more about any of the companies above, head over to CAPS and find out why CAPS members like their stocks so much.

Further Foolishness:

Intuitive Surgical is a Motley Fool Rule Breakers pick. Titanium Metals is a Motley Fool Stock Advisor recommendation. Ctrip.com International is a Motley Fool Hidden Gems selection. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool. The Fool's disclosure policy leaves the gun, but takes the cannoli..


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 28, 2009, at 3:44 PM, catoismymotor wrote:

    FEED has little to no debt. And we all know from watching what Brick Top feeds his pigs they are not picky. That same technique would keep costs down. I'm not emplying anything. Really, I'm not. I swear!

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