5 Low Leverage Stocks to Buy on Expectations of Rate Cuts

Core Viewpoint - Major U.S. stock indices experienced an uptick driven by investor optimism regarding expected Fed rate cuts and easing inflation, suggesting a favorable environment for investments in low-leverage stocks [1] Group 1: Leverage and Investment Strategy - Leverage refers to the practice of borrowing capital for operations and expansion, typically through debt financing, which can be risky if it does not generate returns exceeding interest rates [2] - Companies with high debt levels can pose significant risks during economic downturns, making low-leverage stocks a safer investment choice [2][4] - The debt-to-equity ratio is a common metric used to assess a company's financial risk, with lower ratios indicating better solvency [3][4] Group 2: 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 to ensure liquidity [6] - Additional criteria include earnings per share (EPS) growth greater than the industry median, a VGM Score of A or B, and a Zacks Rank of 1 (Strong Buy) or 2 (Buy) to identify stocks with strong upside potential [7] Group 3: Featured Stocks - Insight Enterprises (NSIT): Recently acquired SADA, enhancing its position in multi-cloud solutions; reported a 20.2% expected earnings improvement year-over-year for Q4 2023 [8] - Arcosa (ACA): Achieved a 7% year-over-year increase in adjusted net income; expected earnings growth of 8.9% for Q4 2023 [9] - Cardinal Health (CAH): Announced a new distribution center to support its at-Home Solutions business; updated fiscal year 2024 EPS guidance to the high end of $6.75 to $7.00 [10] - Photronics (PLAB): Reported an 8% increase in Q4 revenues and a 22.9% rise in adjusted net income; expected earnings growth of 27.5% for fiscal 2024 [11] - Wingstop (WING): Achieved a 26.5% increase in system-wide sales; expected sales growth of 26.4% for fiscal 2024 [12]