In this article, we will be taking a look at the 10 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. With that in context, let’s take a look at the 10 debt-free halal stocks to invest in right now.
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).
Here is our list of the 10 debt-free halal stocks to invest in right now.
10. Alibaba Group Holding Limited (NYSE:BABA)
Number of Hedge Fund Holders: 107
Market Cap as of March 27: $307.16 billion
Enterprise Value as of March 27: $285.83 billion
Alibaba Group Holding Limited (NYSE:BABA), based in China, is a multinational conglomerate operating across e-commerce, retail, internet, and technology sectors. Among its main operations are local consumer services like food delivery, international commerce via AliExpress and Lazada, and China commerce, which includes sites like Taobao and Tmall. Additionally, the business operates digital media platforms, including Youku, Alibaba Cloud for cloud computing services, and Cainiao for logistics.
After a year of transition, Alibaba Group Holding Limited (NYSE:BABA) demonstrated significant momentum across its key businesses in 2024, which was propelled by an AI-powered, user-first strategy focused on cloud services and e-commerce. With revenue up 11% (excluding Alibaba-consolidated subsidiaries), the cloud business reported strong growth, and for the sixth consecutive quarter, revenue from AI-related products continued to increase at triple digits. Platforms like Taobao and Tmall saw significant increases in order volumes and new users in e-commerce, with VIP memberships reaching 49 million and customer management income rising 9% year over year. The international e-commerce business also continued to grow steadily, and AIDC is expected to announce its first profitable quarter in the next fiscal year. Given its strong performance, Alibaba is also considered among the best halal stocks for investors seeking Shariah-compliant opportunities.
Over the next three years, Alibaba Group Holding Limited (NYSE:BABA) intends to greatly increase expenditures in three crucial areas: cloud infrastructure and artificial intelligence (AI), native applications and foundational AI models, and incorporating AI into its current operations. The business stated that its anticipated expenditures for cloud and AI infrastructure will surpass its whole investment in this field during the previous ten years. With a healthy net cash position and ongoing attempts to reduce its balance sheet through asset sales, share buybacks, and careful debt management, the company’s finances are still sound.
9. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 117
Market Cap as of March 27: $164.39 billion
Enterprise Value as of March 27: $163.52 billion
The ninth stock on our list of the best halal stocks is Adobe Inc. (NASDAQ:ADBE). It is a global leader in creative and digital marketing software. Its main products—Photoshop, Illustrator, and Acrobat, for example—have established themselves as industry standards for document management and content production, catering to a wide spectrum of clients from small businesses to individual producers. Digital experience creation, collaboration, and enhancement are made possible via the company’s Creative Cloud, Document Cloud, and Experience Cloud platforms.
Adobe Inc. (NASDAQ:ADBE) recently released Q2 guidance that matched market forecasts and posted better-than-expected Q1 2025 earnings. Analysts were concerned, meanwhile, about modifications to its disclosure of subscription revenue. The new reporting strategy makes it more difficult to monitor Creative Cloud’s core business performance, according to a Citi analyst who has a neutral rating on the company.
Matthew Swanson, an analyst at RBC Capital, on the other hand, had a positive assessment of the impressive Q1 performance. He emphasized Adobe Inc. (NASDAQ:ADBE)’s initiatives to implement fresh indicators that provide investors with a better understanding of the company. Swanson also said that focus is turning to the next Adobe Summit, where the business is anticipated to reveal more information regarding how it plans to make money off of its AI technologies. The analyst took a cautious stance, lowering his price objective for the stock from $550 to $530, even though he still maintained an Outperform rating.
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