We recently compiled the list of the 7 Best Halal Stocks To Buy Now (Debt Free) according to the hedge funds using the latest sentiment data. In this article, we are going to take a look at where AAON, Inc. (NASDAQ:AAON) stands against the other halal debt free stocks.

Halal Investing: Debt-Free Stocks, Islamic Funds, and Shariah-Compliant Indices

Islamic equity investing, also known as Halal investing, has gained significant traction recently as Muslim investors seek to align their financial decisions with their religious beliefs. One of the key principles of Islamic finance is the avoidance of interest (riba) and excessive debt, which has led to the emergence of debt-free Halal stocks as a viable investment option. Debt-free Halal stocks are shares of companies that operate by Islamic principles and have zero interest-bearing debt on their balance sheets. These companies finance their operations through retained earnings, equity financing, or other Shariah-compliant methods.

The global halal market, encompassing food, finance, cosmetics, pharmaceuticals, and tourism, is projected to reach a staggering $7.7 trillion by 2025, more than doubling from $3.2 trillion in 2015. Some of the best debt-free Halal stocks to consider investing in currently include Intuitive Surgical, Microsoft, and Abbott Laboratories, among others.  Muslim millennials, with an estimated combined spending power of $2.45 trillion, are driving the demand for halal products and services. If we talk about the prices of halal stocks, the average price of halal stocks in the US varies depending on the company and sector. For instance, Saffron Road which is a leading halal food brand, was acquired by Navis Capital Partners in 2022 for an undisclosed amount.

Several Islamic funds offer exposure to US-traded stocks that comply with Shariah principles. One of the most popular and well-established funds is the Amana Growth Fund which is managed by Saturna Capital. This fund invests in a diversified portfolio of Halal stocks listed on major US exchanges, adhering to strict Islamic investment guidelines. Amana Growth Fund has returned 9.3% so far this year, 2.5 percentage points less than the category, earning it a D. Over the last year, Amana Growth Fund has returned 26.0% (grade of D), 10.2% over the previous three years (grade of A), 17.8% over the previous five years (grade of A), and 14.9% annually over the previous ten years (grade of A). Another notable fund is the Azzad Ethical which is managed by Azzad Asset Management. Azzad Ethical seeks to invest in companies that operate by Islamic principles and have strong financial performance and growth potential.

The S&P High Yield Dividend Aristocrats Shariah Index tracks Shariah-compliant companies within the S&P 1500 Composite that have consistently increased their dividend payments for at least 20 years. This index focuses on long-standing, dividend-growing companies adhering to Shariah principles. Currently, the index is down 3.97% for the year but has achieved a 5-year return of 9.11%.

Our Methodology 

We chose stocks with debt-to-equity ratios lower than 0.15 as part of our research. Then, we ranked the stocks on the basis of the number of hedge funds holding a stake in them as of Q1, 2024. If two stocks had the same number of hedge fund holders, we tie-broke them on the basis of their debt to equity ratios, with stocks with lower debt/equity ratios outranking the stocks with higher debt/equity ratios.

7. AAON, Inc. (NASDAQ:AAON) 

Number of Hedge Fund Holders: 20 

D/E Ratio: 0.04 

AAON, Inc. (NASDAQ:AAON) is a leading manufacturer of heating, ventilation, and air conditioning (HVAC) equipment, making it an attractive halal stock option for investors seeking Sharia-compliant investments.

AAON has a consensus rating of “Moderate Buy” from Wall Street analysts. The average price target for the stock is $105.00, representing a potential upside of 45.07% from the current price of $72.38. The stock trades at a forward PE ratio of 31.32, which is reasonable considering its growth prospects. AAON also pays a dividend of $0.32, with a yield of 0.44%.

AAON Inc. (NASDAQ:AAON) recently activated 432 solar panels at its new Exploration Center, making it one of the most sustainable and energy-efficient buildings in Tulsa. AAON’s stock has been on a tear, outperforming the S&P 500 year-to-date. The company recently announced a 3-for-2 stock split, which is often seen as a bullish signal and can attract more investors. In Q1 2024, 20 hedge fund portfolios held AAON Inc., a increase from 18 in the previous quarter.

In Q1 2024, the company’s gross profit margin expanded to 35.2%, up from 29.0% in Q1 2023 which was driven by favorable pricing and moderating cost inflation. AAON Inc. (NASDAQ:AAON)’s diluted earnings per share (EPS) rose 4.5% to $0.46, benefiting from a $4.4 million excess tax benefit from share-based compensation in the same period.

Overall, AAON, Inc. (NASDAQ:AAON) stands 7th among the 7 Best Halal Stocks To Buy Now (Debt Free). You can visit  7 Best Halal Stocks To Buy Now (Debt Free)  to see the other halal stocks to invest in that are on the hedge fund radar. While we acknowledge the potential of halal stocks, 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 NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure. None: The  7 Best Halal Stocks To Buy Now (Debt Free) is originally published on Insider Monkey.