In this article, we discuss 5 best debt free stocks to buy. If you want to see more best debt free stocks to buy, the risk/reward, and methodology of this list, go directly to 11 Best Debt Free Stocks to Buy.
5. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 59
ASML Holding N.V. (NASDAQ:ASML) ranks #5 on our list of 11 Best Debt Free Stocks to Buy given 59 hedge funds in our database owned shares of the leading semiconductor equipment producer at the end of Q4. In terms of its balance sheet, ASML Holding N.V. (NASDAQ:ASML) has a debt to equity ratio of 0 according to FINVIZ.com and the company ended fourth quarter 2022 with cash, cash equivalents and short-term investments of €7.4 billion. At the end of 2022, ASML Holding N.V. (NASDAQ:ASML) had a backlog of €40.4 billion, an increase of 67% versus the end of 2021, giving the company substantial business in the future.
4. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 97
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a leading semiconductor maker with a strong balance sheet given it had no net debt at the end of Q4 2022. At the end of the fourth quarter, in fact, Advanced Micro Devices, Inc. (NASDAQ:AMD) had cash, cash equivalents and short-term investments of $5.9 billion at the end of the quarter. The company also said it had a total debt of $2.467 billion as of December 31, 2022 although the definition of total debt is different for different companies. While the market expects Advanced Micro Devices, Inc. (NASDAQ:AMD) to grow in the long term, the company is arguably one of the riskier stocks on our list if the big tech companies produce their own semiconductor chips in a meaningful way. As a result, Advanced Micro Devices, Inc. (NASDAQ:AMD) could have downside if it doesn’t gain the market share that the market expects in the future.
3. Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 152
Alphabet Inc. (NASDAQ:GOOG) is another potentially risky stock on our list with potential downside if it doesn’t adjust well enough given the change in the search market. Although its AI still makes mistakes, Microsoft’s AI powered Bing search could potentially gain market share and also increase processing costs for Google. As far as balance sheets go, however, Alphabet Inc. (NASDAQ:GOOG) had substantially more total cash, cash equivalents, and marketable securities than debt, giving the company financial flexibility for more investment in AI. As of March 10, Alphabet Inc. (NASDAQ:GOOG) has a forward P/E ratio of 14.94.
2. Meta Platforms, Inc. (NASDAQ:META)
Number of Hedge Fund Holders: 194
Meta Platforms, Inc. (NASDAQ:META) is a big tech company with a fortress balance sheet with no net debt. In fact, the social media giant repurchased $27.93 billion of its stock for full year 2022, ranking the company among the biggest stock repurchasers in the world for last year. While Meta Platforms, Inc. (NASDAQ:META) issues shares for stock based compensation, the company’s buybacks could help the stock in the long term if they exceed the number of new shares issued and the company’s earnings rise. In the long term, Meta Platforms, Inc. (NASDAQ:META) could benefit from the growth in the metaverse if it is a success.
194 hedge funds in our database owned shares of Meta Platforms, Inc. (NASDAQ:META) at the end of Q4, ranking the stock #2 on our list of 11 Best Debt Free Stocks to Buy.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 259
Microsoft Corporation (NASDAQ:MSFT) is a big tech company with no net debt. While it isn’t clear how much Microsoft Corporation (NASDAQ:MSFT) has in overseas cash and hence how much the company might have to pay to repatriate its overseas cash, the company’s strong free cash flow generation would likely cover any net debt in a few years if management decided to do so. As far as capital returns, Microsoft Corporation (NASDAQ:MSFT) has raised its annual dividend for 20 consecutive years, indicating that the company has generated substantial excess capital in the past. With its cloud and enterprise growth, the company could have more excess capital in the future as well.
259 hedge funds in our database owned shares of Microsoft Corporation (NASDAQ:MSFT) at the end of Q4, ranking the stock #1 on our list of 11 Best Debt Free Stocks to Buy.
Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also take a look at 10 Best Stocks to Buy for Investment and 10 Most Advanced Countries in Nuclear Fusion.
