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 Amazon.com, Inc. (NASDAQ:AMZN) 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).
A customer entering an internet retail store, illustrating the convenience of online shopping.
Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 339
Market Cap as of March 27: $2.134 trillion
Enterprise Value as of March 27: $2.16 trillion
Amazon.com, Inc. (NASDAQ:AMZN) tops our list of the best halal stocks. It is a major American multinational technology company that engages in a variety of industries, including e-commerce, cloud computing through Amazon Web Services (AWS), online advertising, digital streaming, and artificial intelligence. Using technologies like DynamoDB, Redshift, and EMR, the company has been a pioneer in leveraging data analytics and recommendations for e-commerce.
Youssef Squali, an analyst at Truist Securities, reaffirmed his Buy recommendation and $265 price objective for Amazon.com, Inc. (NASDAQ:AMZN) on February 24. North American revenue is slightly exceeding consensus estimates for the quarter thus far, according to Squali’s analysis, which is based on data through February 17. Squali claims that this helps the company maintain its standing as a significant force in the broadband retail industry while giving it an edge over its smaller rivals.
The financial performance of Amazon.com, Inc. (NASDAQ:AMZN) in the fourth quarter of 2024 demonstrated significant growth, surpassing forecasts with revenues of $187.8 billion and an EPS of $1.86. Additionally, operating income climbed from $13.2 billion to $21.2 billion in Q4 2024, while net income more than doubled to $20 billion, primarily due to AWS.
Polen Focus Growth Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q4 2024 investor letter:
“Consistent with our thesis, Amazon.com, Inc. (NASDAQ:AMZN) has continued to see operating margins expand, hitting 11% in the most recent quarter after bottoming around 2% at the end of 2022. This march higher in margins stems from a mix shift towards faster-growing, higher-margin segments like Amazon Web Services (AWS) and Advertising, combined with better fulfillment efficiency in the e-commerce business following significant investments in recent years. Further, speaking to its runway ahead, CEO Andy Jassy noted the company’s AI business is a “multi-billion-dollar business growing triple digits,” 3x faster than AWS did itself at the same stage in its evolution. While we trimmed our position during the quarter, Amazon remains our largest position, as we expect approximately 20% earnings growth over the next five years driven by a mix of solid organic revenue growth and continued margin expansion.
We trimmed our positions in UnitedHealth Group, Amazon, ServiceNow, and Gartner during the quarter. Amazon continues to deliver excellent results with all businesses growing robustly and profit margins expanding. When we significantly increased Amazon’s weighting in the portfolio about two years ago, its operating margins were at 2%, and we anticipated they would expand to the mid-teens over the next few years. Today, they stand at 11%, and we expect them to expand closer to the high-teen level in the next few years. The earnings growth potential from here is roughly 20% per annum based on our expectation for revenue and profit margin expansion. While this still represents excellent potential and Amazon remains our largest position, we no longer feel it merits a maximum position size.”
Overall, AMZN ranks 1st on our list of debt free halal stocks to invest in right now. While we acknowledge the potential of AMZN, 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.