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 Intuitive Surgical, Inc. (NASDAQ:ISRG) 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.
A medical team performing minimally invasive surgery with a da Vinci Surgical System.
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).
Intuitive Surgical, Inc. (NASDAQ:ISRG)
Number of Hedge Fund Holdings: 82
Market Capitalization as of January 31: $203.96 Billion
Enterprise Value: $199.95 Billion
Intuitive Surgical, Inc. (NASDAQ:ISRG) is a pioneer in robotic-assisted surgery and is best known for its da Vinci Surgical System. The company generates revenue through the sale of surgical robots, instrument replacements, and maintenance services. Intuitive Surgical, Inc.’s (NASDAQ:ISRG) robotic systems enable minimally invasive procedures across various medical fields, including urology, gynecology, and general surgery.
Intuitive Surgical, Inc. (NASDAQ:ISRG) is focusing on the full launch of da Vinci 5, its fifth-generation multi-port platform. The company has already placed 362 da Vinci 5 systems in 2024, with over 2,500 surgeons performing more than 32,000 procedures. The da Vinci 5 offers a wide range of clinical indications and has been used for over 40 different procedure types.
Intuitive Surgical, Inc. (NASDAQ:ISRG) plans to roll out hardware and software upgrades to enhance the digital features supported by a 10,000-time increase in computing power. These upgrades will focus on improving surgical precision, ergonomics, and data analytics by providing surgeons with a more comprehensive surgical experience. The company is also working on securing regional clearances and expanding the platform’s availability globally, which will drive adoption and increase market penetration.
Intuitive Surgical, Inc. (NASDAQ:ISRG) is also focused on building industrial scale and optimizing its manufacturing processes. The company is opening new facilities for da Vinci 5 and Ion system manufacturing in California and new endoscope manufacturing facilities in Germany and Bulgaria. These expansions will enhance production capacity, improve product margins, and reduce costs. Intuitive Surgical (NASDAQ:ISRG) is also transferring mature products to facilities in Peachtree Corners, Georgia, and Mexicali, Mexico, to further optimize its manufacturing footprint.
Overall ISRG ranks 2nd on our list of the best debt free stocks to buy now. While we acknowledge the potential of ISRG 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 ISRG 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.
