We recently compiled a list of the 10 Best Debt Free Mid Cap Stocks to Buy Now. In this article, we are going to take a look at where MarketAxess Holdings Inc. (NASDAQ:MKTX) stands against the other debt free mid cap stocks.
Debt-free mid-cap stocks currently offer compelling investment opportunities, especially in today’s high-interest-rate environment. With borrowing costs elevated, companies burdened by debt face increased financial pressure, making debt-free businesses more resilient and attractive. Mid-cap stocks, in particular, balance growth potential with relative stability, often providing more agility and higher upside than large-cap counterparts. Moreover, companies with strong balance sheets and zero debt have more cash capacity to reinvest profits into growth initiatives rather than servicing the debt. As legendary investor Peter Lynch succinctly advised, “Companies that have no debt can’t go bankrupt,” highlighting the inherent safety and resilience found in debt-free investments.
Many modern fund managers support the philosophy of Peter Lynch and prefer companies that have an insignificant impact on profitability from interest costs. For reference, the Fundsmith Equity Fund, which has outperformed the world stock market index by 3 percentage points on average since inception, highlights that one of the secrets of its long-term success is, among others, picking stocks with low amounts of debt. They illustrate their performance by calculating that the average company they own has an interest coverage three times higher than the average company in the US stock market – this is primarily achieved by carefully selecting debt-free companies. They also argue that companies with strong balance sheets are more likely to be priced at higher valuations:
“Our portfolio consists of companies that are fundamentally [including debt levels] a lot better than the average of those in the broader market, so it is no surprise that they are valued more highly than the average S&P 500 company.”
READ ALSO: 10 Best Debt Free Stocks to Buy Now
Less than two years have passed since the FED funds rate reached its peak in mid-2023. Contrary to a common misconception, we believe that the effects of high interest rates in the economy have not yet been felt at the individual company level. The reason is simple – most of the debt held by the average US company was issued prior to 2023 at lower coupon rates. In this context, as the lower interest rate debt is gradually refinanced and rolled over, it is inevitable that the actual interest costs of companies will become higher, directly impacting their profitability and cash flows. Lower free cash flow, in turn, means less reinvestment into the business and, as a result, weaker long-term growth potential. This is the mechanism through which the current elevated interest rates may finally hit the stock market in the coming years.
The problem of high interest rates in the economy is further aggravated by the policies of the new US administration. The FED mentions that they are not rushing to lower interest rates because the Trump 2.0 Tariff Turmoil is very likely to cause a spike in inflation in April, as (or if) the previously announced tariffs are enforced. Also, the US job market, manufacturing activity, and consumers are still relatively healthy, albeit there is a slight slowdown in optimism and spending appetite. Under such conditions, any premature cut in interest rates by the FED risks stagflation, which is one of the most destructive scenarios possible. The key takeaway for investors is that interest rates in the economy are likely to stay elevated above 4% for the foreseeable future, meaning that the impact on the profitability of high-debt companies is likely to increase over time. In this context, debt-free companies, and particularly mid-caps, shall be preferred by investors as they offer the most resilience and stability for the future.
A trader in a busy trading room, surrounded by real-time market data and automated execution services.
Our Methodology
We used a screener to identify mid cap companies between $2 billion and $10 billion market capitalization, with little to no debt. To quantify the debt level, we compared the enterprise value with market capitalization and opted for the stocks with the smallest difference between the two measures. Then we compared the list with our Q4 2024 proprietary database of hedge funds’ ownership and included in the article the top 10 stocks with the largest number of hedge funds that own the stock.
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).
MarketAxess Holdings Inc. (NASDAQ:MKTX)
Number of Hedge Fund Holders: 45
Enterprise Value: $7.68 billion
Market Capitalization: $8.26 billion
MarketAxess Holdings Inc. (NASDAQ:MKTX) operates a leading electronic trading platform that enhances trading efficiency and provides a diversified pool of liquidity to institutional investors and broker-dealers in the global fixed-income markets. The platform facilitates the trading of various fixed-income securities, including US and European high-grade corporate bonds, high-yield bonds, emerging market debt, and other fixed-income instruments. MKTX offers automated and algorithmic trading solutions, along with integrated market data and post-trade services, supporting the full trading lifecycle.
MarketAxess Holdings Inc. (NASDAQ:MKTX) framed 2024 as a foundational year, marked by substantial investments in technology, setting the stage for 2025 to focus on execution and delivering results. The company operates through three main trading channels – client-to-dealer, portfolio trading, and dealer-to-dealer – with the client-to-dealer segment remaining the most critical. Within the US corporate bond space, MKTX continues to lead the traditional RFQ platform market, offering all-to-all trading capabilities and deep liquidity. Portfolio trading, while accounting for 9–10% of the market and peaking at 13%, generates lower revenue due to its fee model. However, the company has made notable advances in block trading, successfully executing over $1 billion in large bond trades with strong results.
The broader shift toward electronic trading has also contributed to higher market turnover, with dealer-to-dealer trading growing from 24% to nearly 30% of market share. Rather than broadly allocating resources, MarketAxess Holdings Inc. (NASDAQ:MKTX) is strategically targeting investments where it sees the greatest total addressable market potential, particularly in block trading. The recent acquisition of Pragma has further enhanced its tech stack, with integration spanning both rates and corporate bond platforms. Despite ongoing development efforts, the company remains cost-conscious, directing about 80% of its $65–70 million capital expenditure budget toward technology and software development, reinforcing its focus on scalable, high-impact innovation. With low levels of debt and 45 hedge funds owning the stock, MKTX is one of the best debt free stocks to buy now.
Overall MKTX ranks 10th on our list of the 10 best debt free mid cap stocks to buy now. While we acknowledge the potential of MKTX 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 MKTX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.