If you’re an investor interested in debt-free halal stocks, Finance Writer Laiba Immad gives her take on the most notable players currently in the market.
By Laiba Immad
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 USD7.7 trillion by 2025, more than doubling from USD 3.2 trillion in 2015. Muslim millennials, with an estimated combined spending power of USD 2.45 trillion, are driving the demand for halal products and services.
Several Islamic funds offer exposure to US-traded stocks that comply with Shariah principles. One such fund is Amana Growth Fund, which is managed by Saturna Capital.
This fund invests in a diversified portfolio of Halal stocks listed on major US exchanges, which claims to adhere to strict Islamic investment guidelines. The fund claims a return of 9.3% so far this year, 2.5 percentage points less than the category, earning it a D.
Over the past year, the fund claims it 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 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 that which claim 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 are chosen with debt-to-equity ratios lower than 0.15. Then, stocks are ranked 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, they are tied on the basis of their debt to equity ratios, with stocks with lower debt/equity ratios outranking the stocks with higher debt/equity ratios.
The best halal stocks to watch in Q3
Archer Aviation Inc. (NYSE: ACHR) is a debt-free company in the urban air mobility space.
It has a bullish outlook from analysts, with a consensus “Strong Buy” rating and an average 12-month price target of USD7.63, representing a potential upside of 131.21% from the current price of USD3.30.
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 USD12.00, while the lowest is USD4.50.
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 USD130.56 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 USD693,000 worth of shares (0.01% of portfolio), and HBK Investments LP (managed by David Costen Haley), with USD346,500 worth of shares (<0.01% of portfolio).
The company’s adjusted EBITDA loss stood at USD77.6 million in Q1 2024 and maintained strong liquidity position of over USD520 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.
AAON Inc. (NASDAQ:AAON) is a manufacturer of heating, ventilation, and air conditioning (HVAC) equipment.
AAON has a consensus rating of “Moderate Buy” from Wall Street analysts. The average price target for the stock is USD105.00, representing a potential upside of 45.07% from the current price of USD72.38. The stock trades at a forward PE ratio of 31.32, which is reasonable considering its growth prospects. AAON also pays a dividend of USD0.32, with a yield of 0.44%.
Its 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., an 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 USD0.46, benefiting from a USD4.4 million excess tax benefit from share-based compensation in the same period.
Acumen Pharmaceuticals, Inc. (NASDAQ:ABOS) 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 USD13.50, 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. is RA Capital Management, holding shares valued at USD60 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 USD12.4 million due to ALTITUDE-AD trial costs and G&A expenses rose 20% to USD5.3 million, driven by higher headcount.
Adicet Bio, Inc. (NASDAQ:ACET) is a clinical-stage biotechnology company focused on developing allogeneic gamma delta T cell therapies for cancer and autoimmune diseases.
According to 7 analysts, the average rating for ACET stock is a “Strong Buy.” The 12-month stock price target is USD15.17, representing a potential upside of 1,075.97% from the current price. Analysts are bullish on Adicet Bio due to its promising pipeline and upcoming catalysts, including clinical data readouts.
There are 22 hedge fund holders in the company as of Q1 2024. The hedge fund with the largest position in ACET is OrbiMed Advisors LLC.
In Q1 2024, Adicet Bio, Inc R&D expenses were USD23.9 million, down from USD26.8 million in Q1 2023 and the general and administrative (G&A) Expenses stood at USD7.0 million, up from USD6.6 million in Q1 2023. The company is on track to initiate a Phase 1 clinical trial for ADI-001 in lupus nephritis in Q2 2024.
Absci Corporation (NASDAQ:ABSI) is a biotechnology company that utilizes artificial intelligence (AI) and synthetic biology to create next-generation protein-based drugs. The company’s AI-powered drug creation platform enables the design and development of novel proteins with enhanced properties for therapeutic applications.
Absci Corporation has an average 12-month price target of USD8.67, with a high of USD13.00 and a low of USD6.00, according to the study of four Wall Street analysts conducted over the last three months. The current price of USD4.51 has increased by 92.24% to this average. The analysts are optimistic about Absci’s differentiated AI-driven drug discovery platform, which combines artificial intelligence with wet lab technologies to create novel biologics. They see significant growth potential as the company advances its pipeline of drug candidates like ABS-101, ABS-201, and ABS-301
The largest institutional shareholder of Absci Corporation is Fmr Llc (Fidelity), holding 6,863,544 shares. Hedge funds have been actively trading Absci Corporation’s stock in Q1 2024. Redmile Group, LLC increased its position by 2.8% during the quarter, further solidifying its position as the second-largest shareholder. Platinum Investment Management Ltd. Which is another notable hedge fund, reduced its stake by 7.3% but still holds 776,602 shares valued at USD4.41 million. Affinity Asset Advisors LLC, a relatively new investor, acquired 1,025,000 shares worth USD5.82 million, representing a 0.906% ownership stake in the company.
In Q1 2024, the company’s revenue stood at USD900,000 and the R&D expenses were reported to be USD12.2 million, down from USD12.7 million in the prior year period. Their selling, general, and administrative expenses were USD8.7 million in Q1 2024, decreased from USD9.6 million in the prior year period and the company raised approximately USD86.4 million in net proceeds from a public offering of common stock.
ACADIA Pharmaceuticals Inc. (NASDAQ:ACAD) is a biopharmaceutical company focused on developing and commercializing innovative medicines for central nervous system (CNS) disorders and rare diseases.
The company’s flagship product, NUPLAZID, is approved for the treatment of hallucinations and delusions associated with Parkinson’s disease psychosis. ACADIA has an average 12-month price objective of USD27.75, with a high of USD39.00 and a low of USD17.00, based on the projections of 16 Wall Street analysts over the last three months. Compared to the current price of USD15.03, this average shows an 84.63% rise.
A total of 33 hedge funds reported holding shares of ACADIA Pharmaceuticals Inc. Baker Bros. Advisors LP remained the largest hedge fund holder with 42.8 million shares worth USD792.5 million, comprising 9.9% of their portfolio. EcoR1 Capital LLC held 5.9 million shares worth USD110.7 million, accounting for 2.8% of their portfolio.
In Q1 2024, the company reported total revenues of USD205.8 million, a 74% increase year-over-year which was driven by NUPLAZID net product sales of USD129.9 million, up 10% year-over-year; and DAYBUE net product sales of USD75.9 million (no sales in Q1 2023 as it was recently launched).
Its cash, cash equivalents, and investment securities were USD470.5 million as of March 31, 2024.
Arch Capital Group Ltd. (NASDAQ:ACGL) is a Bermuda-based insurance and reinsurance company with a strong financial position and debt-free balance sheet.
Arch Capital Group has an average 12-month price target of USD108.58, with a high of USD119.00 and a low of USD92.00, based on the projections of 12 Wall Street analysts over the last three months. From the current price of USD99.58, this implies a 9.04% gain.
In Q1 2024, 45 hedge funds held positions in Arch Capital stock. The hedge fund with the largest holding was Egerton Capital Limited, which held 3.4 million shares worth USD314.3 million, comprising 3.03% of their portfolio. The second-largest hedge fund holder was Polar Capital, holding 3.1 million shares worth USD287.3 million, making up 1.5% of their portfolio.
In Q1 2024, Arch Capital’s gross premiums written stood at USD5.93 billion, up 24.1% year-over-year, and net premiums written were USD4.09 billion, up 19.3% year-over-year. In the same period, net premiums earned were USD3.42 billion, up 18.7% year-over-year.
Notes from the Editor: This feature has been edited from its original publication here. This feature is not intended to give financial advice. It is for information purposes only.
