ZACKSยท2025-05-14 15:35Market Overview - Major U.S. stock indices ended May 13 on a higher note due to easing trade tensions between the U.S. and China, along with softer-than-expected inflation data [1] - The two nations agreed to a 90-day tariff pause, which has contributed to increased investor optimism [1] Investment Strategy - Positive market sentiment may encourage investors to trade on Wall Street, but the sustainability of this rebound is uncertain due to the temporary nature of the tariff pause and changing global market dynamics [2] - To mitigate potential losses during market turmoil, it is advisable to select low-leverage stocks such as 1st Source (SRCE), Kingstone Companies (KINS), MasTec (MTZ), Dorman Products (DORM), and Sterling Infrastructure, Inc. (STRL) [2] Understanding Leverage - Leverage refers to the practice of borrowing capital for operations and expansion, typically through debt financing [4] - Excessive debt financing can lead to significant losses, making it crucial for investors to avoid companies with high debt levels [5] Debt-to-Equity Ratio - The debt-to-equity ratio is a key metric for assessing a company's financial risk, with a lower ratio indicating better solvency [7] - Companies with high debt-to-equity ratios may face challenges during economic downturns, despite strong earnings growth [8] Stock Selection Criteria - Stocks should have a debt-to-equity ratio lower than the industry median, a current price of at least $10, and an average 20-day trading volume of 50,000 or more [11] - Additional criteria include a percentage change in EPS greater than the industry median, a VGM Score of A or B, estimated one-year EPS growth greater than 5%, and a Zacks Rank of 1 or 2 [12] Company Highlights - 1st Source (SRCE): A bank holding company with a net income of $37.52 million for Q1 2025, up 27.38% year-over-year, and a return on average assets of 1.72% [14][15] - Kingstone Companies (KINS): A property and casualty insurance holding company with a 51% year-over-year increase in net premium earned and a 125% surge in EPS for Q1 2025 [16][17] - MasTec (MTZ): An infrastructure construction company with a 6% year-over-year revenue increase and a projected 54.9% improvement in earnings for 2025 [18] - Dorman Products (DORM): A supplier of automotive replacement parts with an 8.3% increase in net sales and a 54% rise in adjusted EPS for Q1 2025 [19][20] - Sterling Infrastructure (STRL): A company specializing in E-Infrastructure and building solutions, reporting a 7% revenue increase and a 29% surge in adjusted EPS for Q1 2025 [21]