Introducing the Strong Balance Sheet collection

​COVID-19's most dire impact on the economy is its unique speed. In a matter of one quarter, the demand for some sectors of the economy has fallen to nearly zero. Take airlines as an example. Compared to last year, the number of travelers going through airport TSA has fallen by 97%. Therefore, the source of immediate revenue for airlines has dried down. The situation is no better for restaurant, entertainment, or retail industries. The impact is not as drastic in other industries and sectors. However, a 20% to 30% decline in the revenue of a payment processor and credit company is not unreasonable. It's a no brainer to screen your investment universe for companies with enough cash on their balance sheet to compensate for the lack of revenue without the need to borrow money to fund the day-to-day operations. Focusing on companies with a strong balance sheet would drastically increase the odds of success in the COVID-19 era.

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What criteria did Stock Card use to populate this new collection?

Having a strong balance sheet is a combination of how much cash the company has at its disposal, how much liability or debt it has to cover, and whether the company has the resources to fund its operations without the need to borrow money or raise capital. We used the following nine criteria to generate the strong balance sheet collection:

1. Market capitalization of > $300 million - To avoid smaller companies that have more volatile stocks.
2. 30-day average daily volume > 10,000 - To avoid dormant stocks.
3. Trailing twelve months earnings per share (EPS) > $0.00 - To avoid unprofitable companies.
4. Free cash flow > $0.00 - To avoid companies who haven't found a way to generate free cash flow yet.
5. Three-year free cash flow growth rate > 0% - To focus on the companies that have consistently grown their free cash flow in the last few years.
6. Financial debt to EBITDA ratio > 3 - To make sure if the company has debt, it can generate enough earnings before interest, tax, depreciation, and amortization to pay off that debt in less than three years.
7. Debt to equity ratio < 0.5 - To remove companies with high amount of long-term debt.
8. Current ratio > 1.5 - To focus on companies that have enough short-term assets to cover its short-term liabilities without any concern.
9. And, finally, three-year revenue growth > 0% - To focus on the companies that have historically been growing and can go back to growth as soon as COVID-19 impact is subsided.

The result of the above screening is a list of more than 250 stocks that you can easily access, play around, and pick and choose from and create your COVID-19 portfolio. Visit the Strong balance sheet collection.