We recently compiled a list of the 10 Best Debt Free Stocks to Buy Now. In this article, we are going to take a look at where GE Vernova Inc. (NYSE:GEV) stands against other best debt free stocks to buy now.
In the current economic landscape, characterized by high interest rates, the importance of debt-free stocks has become increasingly significant for investors. Debt-free companies do not have to allocate resources to paying interest on loans or other forms of debt. This means they have more financial flexibility to invest in growth opportunities, research and development, and other strategic initiatives that can enhance their long-term value. In a high-interest-rate environment, this flexibility is crucial and can lead to stronger financial performance and a more resilient business model, which is especially important during economic downturns.
Moreover, debt-free stocks tend to be less volatile during periods of economic uncertainty. High interest rates often accompany inflationary pressures and economic slowdowns, which can lead to market volatility and investor anxiety. Companies with no debt are generally perceived as safer investments, as they are less likely to face financial distress or bankruptcy. This can provide a level of stability and peace of mind for investors, who may be looking to protect their portfolios from the adverse effects of a volatile market.
Another advantage of investing in debt-free stocks in a high-interest-rate environment is the potential for higher dividend yields. Companies with strong cash positions and no debt obligations are more likely to have the financial capacity to pay dividends to shareholders. Additionally, the valuation of debt-free stocks can be more favorable in a high-interest-rate environment.
READ ALSO: 12 Most Promising Green Stocks According to Hedge Funds and 10 Worst Performing Energy Stocks in 2024.
In an interview with CNBC on January 30, Jeffrey Gundlach, CEO of DoubleLine Capital, discussed the Federal Reserve’s recent meeting and the market’s reaction to it. Gundlach noted that the market perceived the Fed’s stance as slightly hawkish, despite the Fed’s emphasis on taking a “no hurry” approach to cutting interest rates. He highlighted that the Fed’s current policy is well-aligned with the current economic conditions, with the two-year Treasury yield and the federal funds rate being closely in sync. However, Gundlach expressed concern over the Fed’s high degree of data dependency which suggests that this approach might lead to short-termism in monetary policy decisions.
Gundlach also pointed out the unusual market dynamics since the Fed’s first rate cut in September. He mentioned that typically a rate-cutting cycle would lead to a bond rally, but in this instance, the two-year Treasury yield has increased by 60 basis points, and the ten-year Treasury yield has risen by 85 basis points. This trend, combined with the decline in the long bond ETF, indicates that the bond market has not responded as expected to the Fed’s actions. Gundlach sees this as a sign that the market is in a relatively stable position, with the Fed on hold and waiting for more data to guide future decisions.
Furthermore, Gundlach discussed the valuation concerns in the stock market, particularly the high Cyclically Adjusted Price-to-Earnings (CAPE) ratio of the S&P 500, which stands at about 35. He compared this to the CAPE ratio when Ronald Reagan took office, which was around 10, suggesting that there is limited room for further valuation expansion. This implies that any gains in the stock market will likely be driven by earnings rather than multiple 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 our list of the 10 best debt free stocks to buy now, we used the Finviz stock screener to identify companies with zero or very little debt. We compared their enterprise value (EV) to their market capitalization as of January 31. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
GE Vernova Inc. (NYSE:GEV)
Number of Hedge Fund Holdings: 89
Market Capitalization as of January 31: $102.79 Billion
Enterprise Value: $101.86 Billion
GE Vernova Inc. (NYSE:GEV) is a leading global energy technology company that is dedicated to providing advanced solutions in power generation, electrification, and renewable energy. The company was created as an independent entity from a spin-off from General Electric in 2024 and generates revenue through the sale of wind turbines, power generation equipment, and energy management software.
GE Vernova Inc. (NYSE:GEV) is at the forefront of developing and implementing decarbonization technologies to address the global need for sustainable energy. The company is advancing carbon capture and sequestration (CCS) technology, which is crucial for reducing carbon emissions from power generation plants. The company’s Net Zero Teesside Power project is expected to be the first gas-fired power station fully integrated with CCS technology. Additionally, GE Vernova Inc. (NYSE:GEV) is collaborating with multiple large U.S. utilities to accelerate the deployment of its small modular nuclear reactor, the BWRX-300.
GE Vernova Inc. (NYSE:GEV) is experiencing robust demand for gas generation, driven by the need for reliable power and grid modernization. In 2024, the company secured approximately 20 gigawatts of gas orders, doubling the previous year’s level. The company is now focusing on expanding its production capacity and aims to produce 70 to 80 heavy-duty gas turbines per year by the second half of 2026, up from 48 in 2024. This expansion is crucial to meet the growing demand, particularly from data center hyperscalers driven by the AI boom.
Overall GEV ranks 1st on our list of the best debt free stocks to buy now. While we acknowledge the potential of GEV as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GEV 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 Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
