In this article, we will be taking a look at the 7 best halal stocks to buy now (debt free). You can skip the detailed analysis and head directly to The Best Halal Stock to Buy Now (Debt Free).
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. 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.
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. The 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, the 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 Fund, which is managed by Azzad Asset Management. This fund 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%.
Stocks
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.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here)
Here is our list of the 7 best halal stocks to buy now (debt free).
7. Archer Aviation Inc. (NYSE:ACHR)
Number of Hedge Fund Holders: 20
D/E Ratio: 0.09
Archer Aviation Inc. (NYSE: ACHR) is a promising debt-free company in the urban air mobility space and it stands among the best halal stocks to buy now (debt free). Archer Aviation Inc. (NYSE: ACHR) has a bullish outlook from analysts, with a consensus “Strong Buy” rating and an average 12-month price target of $7.63, representing a potential upside of 131.21% from the current price of $3.30.
Analysts are optimistic about Archer Aviation’s prospects, with 3 “Buy” ratings and 1 “Hold” rating from the 4 Wall Street analysts covering the stock. The highest price target is $12.00, while the lowest is $4.50.
The hedge fund that holds the highest number of shares in Archer Aviation Inc. (NYSE: ACHR) is ARK Investment Management LLC, managed by Cathie Wood. ARK added 13.46% to its position, holding $130.56 million worth of ACHR shares, which comprise 0.01% of its portfolio. Other notable hedge funds holding ACHR include Moore Capital Management LP (managed by Louis Moore Bacon), with $693,000 worth of shares (0.01% of portfolio), and HBK Investments LP (managed by David Costen Haley), with $346,500 worth of shares (<0.01% of portfolio).
The company’s adjusted EBITDA loss stood at $77.6 million in Q1 2024 and maintained strong liquidity position of over $520 million at the end of Q1. Archer flew over 100 test flights in Q1, keeping them on track to exceed their goal of 400 flights this year.
6. 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.
5. Acumen Pharmaceuticals, Inc. (NASDAQ:ABOS)
Number of Hedge Fund Holders: 22
D/E Ratio: 0.12
Acumen Pharmaceuticals, Inc. (NASDAQ:ABOS) is a promising debt-free, halal stock that analysts strongly recommend as a buy. The company is a clinical-stage biopharmaceutical firm developing a novel disease-modifying approach to target the underlying cause of Alzheimer’s disease.
Acumen Pharmaceuticals has a consensus rating of “Strong Buy” from Wall Street analysts, based on 4 buy ratings and no hold or sell ratings. The average 12-month price target is $13.50, representing a staggering 297% upside potential from the current price. Analysts are bullish on the company’s lead drug candidate ACU193 which is a monoclonal antibody that selectively targets toxic amyloid-beta oligomers believed to be a key driver of Alzheimer’s.
Among the largest hedge fund shareholders of Acumen Pharmaceuticals, Inc. (NASDAQ:ABOS) is RA Capital Management, holding shares valued at $60 million. The company’s cash runway is expected to fund operations into 2026, including the initiation of a Phase 2 trial for ACU193 in the first half of 2024. In Q1 2024, R&D expenses increased 43% to $12.4 million due to ALTITUDE-AD trial costs and G&A expenses rose 20% to $5.3 million, driven by higher headcount.