According to royal expert Katie Nicholl, King Charles reportedly nicknamed his daughter-in-law Meghan Markle ‘Tungsten’ because of her toughness and resilience. The Oxford English Dictionary defines tungsten as the chemical element of atomic number 74, a hard steel-gray metal of the transition series. It has a very high melting point (3410°C) and is used to make electric light filaments.

Being nicknamed after a rugged metal seems peculiar, but Meghan Markle, Duchess of Sussex, seems like someone with a strong backbone who gets what she wants. Meghan is opportunistic and cunning. Although these may seem like critiques of her personality, they complement her inner strength. Companies with tungsten-like qualities can turn into fantastic growth stocks to invest in.

Here is a list of some companies I would qualify as a Meghan Markle stock:

Alphabet
Shopify
Nvidia
Chipotle
Revolve
Airbnb
Taiwan Semiconductor
Zoom Video
Pinterest
Palantir
Moderna
Intuitive Surgical
Duolingo
Monday.com
The Trade Desk

So, what characteristics do I look for in a Meghan Markle stock?

Companies that have significantly more cash than debt: A company with more debt than cash is not necessarily a bad business – see Live Nation, Netflix, and Uber, as their debt is in use for future growth, but this does create higher risk, especially if a companies revenue plummets. Blue Chip companies like Apple and Berkshire Hathaway are in a separate category. They can safely take on debt for strategic reasons due to their strong balance sheets, track record, and business models.

Investing in the company’s future growth could pay off tenfold (Amazon investing in AWS) or backfire (Peloton expanding showrooms and acquiring Precor during the pandemic). Companies with more debt than cash risk serious liquidity issues, which may further dilute shareholders through equity raises or breaching a loan covenant.

A couple of companies that are NOT Meghan Markle stocks are Carnival Cruise and Royal Caribbean Group. We know why they took on significant loans, and although the pandemic was not their fault, they are far less attractive now than before 2020. These companies have recovered and are seeing healthy booking demand, but it will take several years (if not more) to right their financial health. The increased debt limits their options and leaves them with less wiggle room if the economy were to turn.

Low Capex and G&A ratios: Lower Capex and G&A spending can lead to higher free cash flow and a better return on capital. Relatively low costs for assets like factories or equipment mean the company can focus on capturing more market share and expanding into international markets. For tech companies, you want them to spend heavily on R&D rather than on upgrading stores. For apparel brands, you want them to spend heavily on S&M to build up their brand rather than on office furniture because when Capex and G&A make up a meaningful percentage of a company’s net income, that could indicate excess spending. If profit margins are increasing faster than Capex, that’s typically a sign of healthy financial growth.

Market cap higher than their Enterprise value: This characteristic echoes a company having more cash than debt. Companies like these have a low probability of going into bankruptcy and are attractive acquisition targets. Companies sitting on a lot of cash and little debt are typically more nimble and opportunistic. They can wait for the right time to issue share buybacks, reinvest in their business, make acquisitions, or be acquired themselves.

Proven more than two or more consecutive years or eight straight quarters of being free cash flow positive: A solid growth company has to prove it can be profitable in the long term. Being free cash negative is not a long-term sustainable business model. At some point, there needs to be a long enough track record of consistent growth; if not, the investment is just a speculative bet. If free cash flow exceeds net income every quarter, that could signify a money-printing business. Yelp has always been free cash flow positive since being a public company. The business may not seem appetizing, but its performance and return to investors have been much better than the companies that get the most airtime on CNBC and Bloomberg.

Important things to consider:

Asset light does not equate to a moat: Amazon is more debt-intensive than other big tech companies, which has helped them create a durable moat. How many companies will outspend Amazon to build a better logistics network? The same goes for Uber and its global ridesharing network. Debt and high spending can help a company have true pricing power, so there are potential trade-offs when a company sacrifices immediate profits for future growth.

Rising Free Cash Flow drives growth: A company that can produce consistently growing free cash flow is worth looking into, even if it has increased expenses, debt, or equity dilution. Apple is miraculous as they have higher free cash flow than most other companies, bringing in total revenue! They are more of an anomaly as they have so much cash and can increase their dividend while buying back their shares simultaneously.

Industry matters: Certain industries, like e-commerce, have more competition. Getting market share can be difficult during a challenging macro, creating a cash burn. The lower the startup costs, the easier for new entrants to disrupt the market. Specific sectors in technology are volatile, so a pristine balance sheet may reflect little returns for investors.

The critical aspects of these Meghan Markle stocks are toughness and resilience. Consumer headwinds can persist for several quarters, and if these companies remain profitable during a touch macro, that is a good sign of long-term durability. Like cockroaches, a company with low debt, consistently rising revenue, and free cash flow is almost impossible to squish. A company’s financials are easily accessible on a balance sheet, and any investor should know these basic figures to establish a framework of understanding before making a more thorough analysis and deep dive.