It's a matter of fact that some corporations carry a significant level of debt, and certainly a number of screens have explored the notion of debt impacting stock returns (with mixed success if memory serves me correctly).

I've been thinking about the situation we are in with regards to the markets, and like many people, it's easy to conclude that we're in a high-risk environment where a lot of things could go wrong. And at the risk of dating myself, I'm at that age where taking on high risk is a fools errand.

One of the big news items of late is the debt level of the USA, and the risks associated with that debt: higher interest rates mean much higher costs to service that debt, and now the very real possibility of many nations not having much interest in helping pay for the party that the USA has experienced for many years.

Corporate debt could be problematic as well - the cost of servicing debt is growing, and... it could get harder to attract bond buyers (seems these days everyone wants to own equity, not bonds, but maybe that's just me). It would also seem that high corporate debt could scare off merger interest, or any type of takeover, going private, etc.

With that in mind, I went to backtest.org. Yes, I know the new back tester has more capability and newer data, but I wanted to spend 15 minutes and just play around. Jamie's tester is still a thing of beauty, and super easy to use!

What I'm presenting here is *not* something I spent hours trying out to see what I could curve fit (you'll have to trust me on this one).

I started with weak companies - the bottom 50 in the SI Pro universe as rated by rs26w. As a final selection, I used LT Debt / total capital Y1, and took the top 10.

backtest.org: Screen Builder for the curious.....

Yes, the GSD is frightening at 102. But a CAGR of -40, with every year since 2011 being negative, got my attention. Especially given that this was the first thing I tried, with no other filters or sorts, etc. It's about as simple as it gets.

Running that same screen but picking the bottom 10 debt / total capital gives a CAGR of 14. backtest.org: Screen Builder

When you see a CAGR spread like that with one parameter switch, it gets your attention.

I know some people are questioning how much appetite they have for US stocks at this point. Totally get that. But perhaps it's worth thinking about taking it one step further and placing a few bets on the short side of things?

I would love to hear what people think, and what refinements you'd suggest to bring the GSD down in particular.

Thx., Lee