When looking for relatively low-risk equity investments, companies with strong balance sheets are a good place to start the search. If they happen to be effectively debt-free with a net cash position, then even better. With no financial pressure on companies to service loans during business downturns, the risk of permanent loss of capital is greatly reduced. High debt levels can be particularly dangerous for small cap companies or highly cyclical businesses experiencing difficult trading conditions. The fact that a company has been able to build up a net cash position over time (assuming it hasn’t been raised from investors) is a good sign of the company’s ability to generate cash internally. Too many companies source cash from investors rather than from their own operations.