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Buy These 5 Low-Leverage Stocks Amid Volatile Market Sentiment

Aparajita Dutta
7 min read

In This Article:

The U.S. stock market showed mixed signals on May 29, with investors reacting to a combination of events. While NVIDIA’s strong quarterly results and a favorable ruling from the U.S. International Trade court against Trump-imposed tariffs supported gains on the Nasdaq and S&P 500, the Dow Jones slipped, weighed down by investor concerns over the broader economic outlook amid escalating geopolitical uncertainties.

Given such volatile market sentiment, prudent investors are expected to choose safe bet stocks like Novartis NVS, ENGIE SA ENGIY, MasTec MTZ, Dorman Products DORM and Sterling Infrastructure, Inc. STRL to safeguard their portfolio from huge losses (in times of crisis). These stocks bear low leverage and, therefore, should be a safer option for investors if they don’t want to lose big in times of market turmoil.   

Now, before selecting low-leverage stocks, let’s explore what leverage is and how choosing a low-leverage stock helps investors.

What’s the Significance of Low-Leverage Stocks?

In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance. This is probably due to the cheap and easy availability of debt over equity financing.

However, debt financing has its share of drawbacks. Particularly, it is desirable only as long as it successfully generates a higher rate of return compared to the interest rate. So, to avoid considerable losses in your portfolio, one should always avoid companies that resort to excessive debt financing.

The crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.

The equity market can be volatile at times, and, as an investor, if you don’t want to lose big time, we suggest you invest in stocks that bear low leverage and are, hence, less risky.

To identify such stocks, historically, several leverage ratios have been developed to measure the amount of debt a company bears. The debt-to-equity ratio is one of the most common ratios.

Analyzing Debt/Equity

Debt-to-Equity Ratio = Total Liabilities/Shareholders’ Equity

This metric is a liquidity ratio that indicates the amount of financial risk a company bears. A lower debt-to-equity ratio reflects improved solvency for a company.

With the first-quarter 2025 earnings season almost behind us, investors must be eyeing stocks that have exhibited solid earnings growth in the recent past.

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