Many companies get into trouble overleveraging while times are good. They take on too much debt. That becomes a problem with things slow, and the costs to finance that debt become too much to bear.
In contrast, a number of companies have strong balance sheets. Even companies with some debt, but substantial cash, are in a great place right now. They can potentially make a great acquisition at a great price, or find ways to return that cash to shareholders.
One company looking to return cash to shareholders is Doximity (DOCS). The healthcare information services company, which went public just last year, announced that it was looking to buy back $70 million worth of shares.
That sent the stock soaring by over one-third last Friday. But with shares still down nearly 65 percent in the past year, there may be more room for shares to run. With a balance sheet with over $700 million in cash, the company would still have ample capital to fund operations.
Action to take: Shares look less oversold following their recent announcement. But the company still looks inexpensive with growth stories still out of favor with the market. Investors may want to consider taking a small stake here, and buying on any substantial declines.
For traders, the May 2023 $50 calls are a bit of a flyer. But with a recent price around $2.80, a further big increase in shares in the next six months could lead to high-double-digit returns or better.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.