Companies with little or no debt on their balance sheets -- such as Cisco Systems (CSCO - Get Report) (no debt until the acquisition of Scientific Atlanta added a modest $6.5 billion to long-term obligations) and Google (GOOG - Get Report) (no debt) -- are turning out to be bastions of safety for road-weary investors. Likewise, companies with mainly liquid assets (stocks and cash) or with tangible assets (inventory or land) are looking pretty good too. Simply put, when things turn bad, investors turn to quality.
Betting on Banks
But even though the balance sheet is a little bit of sanity in a crazy market, it's not something you should look at by itself. According to Doug Lamdin, a professor of economics at the University of Maryland, Baltimore County, "A balance sheet, at a point in time, can show important financial circumstances such as the ratio of liquid current assets to current liabilities, or how much debt was used to finance the assets. What a good analysis should include is an examination of how balance sheet items, or
ratios, are changing over time, and whether