We recently published a list of 10 Debt Free Halal Stocks to Invest in Right Now. In this article, we are going to take a look at where NVIDIA Corporation (NASDAQ:NVDA) stands against other debt free halal stocks to invest in right now.
Debt-Free Halal Stocks to Invest in Amid High Interest Rates
The current economic conditions with elevated interest rates have made debt-free stocks increasingly valuable to investors. Companies without debt responsibilities avoid spending their funds on interest costs from loans or different types of borrowing. Due to their enhanced financial flexibility, corporate funds can be directed toward research and development, strategic growth projects, and business expansion initiatives that boost long-term business worth. Debt-free flexibility stands as an essential factor because high interest rates create better business models and financial results that matter during recessions.
Low-debt stocks experience lower price volatility in challenging economic circumstances. Economic slowdowns, together with inflationary pressures, bring about elevated interest rates that result in market instability and increased investor concern. Companies without debt stand as more secure financial investments since they encounter a reduced probability of financial problems or bankruptcy. A turbulent market can find potential protection from negative effects through investing in shares with minimal debt which provides stability to uneasy investors.
Investors who buy debt-free stocks receive the advantage of potentially better dividend payments at times when interest rates are elevated. Companies with robust cash reserves together with no debt hold better chances of allocating dividends to investors. The market value of debt-free stocks tends to be higher when interest rates are elevated.
Jeffrey Gundlach shared his thoughts on market reactions to the Federal Reserve’s recent meeting through his CNBC interview on January 30. Gundlach explained that the Fed declared no rush in interest rate suppression but investors interpreted it as moderate hawkishness. He stated the federal funds rate aligns perfectly with the two-year Treasury yield showing that the Fed maintains its current financial policy in response to economic conditions. Gundlach expressed skepticism about data-driven Federal Reserve policy because it potentially creates short-term monetary choices.
He further observed unique market patterns after the Federal Reserve made its first interest rate reduction in September. Gundlach believes bond prices ascended after rate reductions but this situation features two-year Treasury yields increasing by 60 basis points together with ten-year Treasury yields growing by 85 basis points. The bond market displays unexpected behavior after Federal Reserve policy changes because investors observe both this market pattern and falling long bond ETF values. According to Gundlach, the ongoing Federal Reserve pause signifies market stability because they need more evidence before making decisions.
In addition, Gundlach noted that the stock market faces difficulties due to the broader index’s CAPE ratio of around 35. His comparison between the present CAPE ratio and the ratio that stood at 10 during Ronald Reagan’s time shows that future value expansion is quite limited. Profitability stands as the chief determinant to boost stock market performance rather than multiple business expansions.
With interest rates unlikely to decline soon, debt-free stocks remain attractive for their stability, resilience, and strong financial positioning.
Our Methodology
To compile this list, we chose the top 10 stocks from the S&P Shariah ETF, which includes all Shariah-compliant constituents of the broader index. After this, we compared their market caps with their enterprise value to gauge which ones are debt-free. The companies listed below may not be entirely debt-free, but they maintain a solid financial standing with low net debt and substantial cash reserves, ensuring they can comfortably meet their debt obligations. From that list, we picked 10 companies with the highest number of hedge funds having stakes in them, as per Insider Monkey’s database of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Is NVIDIA Corporation (NVDA) the Debt Free Halal Stock to Invest in Right Now?
A close-up of a colorful high-end graphics card being plugged in to a gaming computer.
NVIDIA Corporation (NASDAQ:NVDA) is a leader in accelerated computing, providing a comprehensive platform that includes GPUs, software, and tools. The company’s technology offers solutions for a wide range of industries, supporting AI, data analysis, scientific computing, and 3D graphics.
Deep learning applications in autonomous systems achieve success through the NVIDIA Corporation (NASDAQ:NVDA)’s GPU processing power, which serves as the primary backbone for these AI applications. The company’s GPUs power more than 75% of the world’s advanced supercomputing systems. Additionally, NVIDIA enhances gameplay for players and content developers through its AI-focused investments in autonomous driving.
The combination of powerful AI infrastructure, data center solutions, and gaming technologies positions the company for continued growth. The business asserts that its technology has lasting practicality. Over the past two fiscal years, NVIDIA Corporation (NASDAQ:NVDA) has experienced a revenue increase of more than 100%. As one of the best halal stocks, the company currently holds exceptional bargaining power, demonstrated by its recently achieved operating margin of 62.4%. Industry experts anticipate the business advancing at an increasing pace in the coming years. The company projects its sales to grow at an annual rate of 23.7% over the next four fiscal years.
Overall, NVDA ranks 5th on our list of debt free halal stocks to invest in right now. While we acknowledge the potential of NVDA, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
