Five Debt-Free Investing Opportunities

This column was originally published on RealMoney on May 30 at 2:04 p.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Some of my recent columns have been about industries, such as information technology, which have attracted the interest of merger and acquisition mavens. M&A activity is reaching a fever pitch. I do not try to predict which companies might be acquirers or acquisition targets.

However, I do believe that a company that is financially strong and has a reasonably priced stock -- plus, could be involved in M&A activity -- is a company that should be on everyone's short list of stocks to buy.

Acquisitions often involve the acquirer taking on additional debt; it borrows to pay the sellers. That means companies with little or no debt are more desirable acquisition targets than ones already carrying a heavy debt load. If two companies marry, and one has little debt, the new combination can handle additional debt more easily than if both already have a heavy debt load.

The desirability of low-debt companies prompted me to do a screen for them. I found several. But a simple lack of debt does not make it a good investment.

It must then get a passing grade from at least one of the guru strategies I use to identify good investment opportunities. Below are several such companies.

Let me say that I have no idea if any of these companies will be an acquisition target, but even if they are not, they should be good investments. If any are acquired, well, they could be great investments.

Stryker Corp. (SYK Quote): This medical technology company gets a thumbs-up from the strategy I base on William O'Neil's writings. The strategy likes Stryker because its quarterly profits and annual earnings are up. In addition, earnings per share have increased four out of the past five years.

The O'Neil strategy looks for stocks that are priced high and likely to break out into new, higher territory. Because of this, it wants the stock price to be within 15% of its 52-week high; Stryker's is within 6%.

Stryker's relative strength, which is the stock's price performance compared with the overall market during the past year, is 87, which beats the minimum acceptable of 80. The company's return on equity is a robust 21.9%, higher than the 17% minimum. Of course, the company also has no debt.