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 Meta Platforms, Inc. (NASDAQ:META) 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).

Meta Platforms, Inc. (NASDAQ:META)

Number of Hedge Fund Holders: 262 

Market Cap as of March 27: $1.548 trillion 

Enterprise Value as of March 27: $1.52 trillion 

Meta Platforms, Inc. (NASDAQ:META) develops technological products that enable users to share information, build businesses, and create community bonds. These products facilitate human connection through wearable technology, integrating features from virtual reality (VR) and mixed reality (MR) headsets, mobile devices, and personal computers. The company generates most of its revenue through its advertising division. Research from December indicates that Instagram will account for approximately 50% of the company’s U.S. advertising revenue by 2025.

The Family of Apps generated $47.3 billion in revenue during fiscal Q4 2024, reflecting a 21% growth compared to the previous year. Reported and constant currency ad revenue from the Family of Apps also grew by 21%, reaching $46.8 billion in the last quarter. The prices Meta Platforms, Inc. (NASDAQ:META) charged per ad during fiscal Q4 2024 increased by 14%, while ad impression deliveries across its services expanded by 6%.

The company’s increased monetization efficiency contributes to improved revenue performance. The company achieves this by adjusting organic advertisement density levels and strategically placing ads across all media to reach consumers precisely when and where content is most relevant.

The business enhances both marketing performance and monetization efficiency simultaneously. The company continuously advances its advertising ranking structures, which serve as the primary driver of these improvements. Barclays analyst Ross Sandler maintained his positive recommendation for the business, setting a price target of $705.00 on March 21.

Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q4 2024 investor letter:

“Meta Platforms, Inc. (NASDAQ:META): Investment Initiated: April 2018: Internal Rate of Return (IRR*): 22% *IRR represents the annualized rate of return on investment, accounting for the timing and magnitude of cash flows over the holding period.

For META, our 22% IRR aligns closely with the company’s compounded growth in earnings per share (EPS) and free cash flow per share during the 6-year holding period.

Looking ahead, Meta is expected to grow its revenues, earnings, and free cash flow per share at mid-teens rates over the next two years. There’s a good possibility that it could exceed these estimates, considering the breadth of growth initiatives currently in place, such as advancements in Al, monetization of Reels, expansion into business messaging, and the ongoing development of the metaverse…” (Click here to read the full text)

Overall, META ranks 3rd on our list of debt free halal stocks to invest in right now. While we acknowledge the potential of META, 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 META 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.