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 Alphabet Inc. (NASDAQ:GOOG) 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 laptop and phone open to Google’s services in an everyday setting.
Alphabet Inc. (NASDAQ:GOOG)
Number of Hedge Fund Holders: 234
Market Cap as of March 27: $2.024 trillion
Enterprise Value as of March 27: $1.95 trillion
Alphabet Inc. (NASDAQ:GOOG) operates through three distinct segments: Google Services, Google Cloud, and Other Bets. The Google Services division manages an extensive range of products, including Android, Google Maps, Google Play, Chrome, Search, and YouTube. The primary economic driver of the company is its advertising business, which displays relevant ads alongside search results on its Google search engine. Digital advertising has proven to be an incredibly profitable venture for the company, as its Google search page remains one of the most valuable online assets.
The Google Search platform contributed $175.0 billion, or 73.6%, to Alphabet Inc. (NASDAQ:GOOG)’s total ad revenue of $237.9 billion in 2023. The Google Services branch generated $84 billion in revenue for the fourth quarter of 2024, reflecting a 10% increase from the previous year, primarily due to an 11% rise in advertising revenues. The platform saw a 14% increase in advertising revenue driven by heightened U.S. election-related ad spending. Since the previous elections in 2020, total spending by both parties has risen substantially.
Alphabet Inc. (NASDAQ:GOOG) remains a dominant force in digital advertising and technology, frequently recognized among the best halal stocks for its continued innovation. The company rapidly integrates AI advancements into user interactions while expanding its profitable search revenue base. Its new user-oriented features, such as Circle to Search with voice and camera functions, enhance creative search methods, generating more commercial opportunities for advertisers. As part of its expansion strategy, the corporation announced plans to increase capital expenditures from $53 billion to $75 billion in the current year. The business maintains positive stock market forecasts as it implements artificial intelligence solutions across its operations.
Merion Road Capital Management stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q4 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOG): We have held GOOG for a long time (since 2018) based on its immense business quality paired with an undemanding valuation, improving treatment of minority shareholders, and multiple options for value creation. Recently we have seen Alphabet bashed for losing the AI race to now heralded for its progress. I remain excited about their prospects with several near-term, mid-term, and long-term tailwinds. Near-term, Google Cloud continues its rapid growth and their latest large language model, Gemini 2.0, appears to have made significant progress to better serve consumer needs and improve GOOG’s other product offerings. Mid-term, Waymo is on the cusp of becoming a real value driver for the company; there are abundant articles discussing Waymo stealing share from the ride-share economy and launching in new geographies. Long-term, GOOG’s recently announced quantum computing chip positions it well for a future (many, many years away) where computing processes are fundamentally different from today. All of these options are embedded in a company that already has an established and dominant earnings stream.”
Overall, GOOG ranks 4th on our list of debt free halal stocks to invest in right now. While we acknowledge the potential of GOOG, 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 GOOG 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.
