Wall Street ended yesterday’s trading session on a mixed note. While the benchmark S&P 500 and Dow Jones Industrial Average indices ended in positive territory amid sliding oil prices, tech-heavy Nasdaq slipped as plummeting chip stocks weighed on it.
The oil price drag followed a Reuters report, which stated that Iran would pause military attacks if the United States continued its own pause. On the other hand, chip stocks came under notable pressure after The Information reported that China had begun developing deep ultraviolet lithography machines, which are used to build semiconductors (as cited in CNBC).
This added further uncertainty for investors, particularly those already spooked by massive AI capital expenditure plans, leading to a sharp chip sell-off.
In times of such sector volatility and shifting macro conditions, pivoting to financially resilient companies — particularly low-leverage stocks with robust balance sheets — presents a prudent defensive strategy for the days ahead.
These fiscally conservative companies are better positioned to navigate interest rate fluctuations and geopolitical uncertainty. By providing a stable foundation in a shifting market, they can serve as a strategic hedge against a potential energy-driven economic slowdown.
We recommend low-leverage stocks, such as Ternium TX, Casey’s General Stores CASY, Amalgamated Financial AMAL, Hippo Holdings HIPO and RB Global Inc. RBA. Before selecting low-leverage stocks, it is important to understand what leverage is and how investing in low-leverage companies can benefit investors.
What’s the Significance of Low-Leverage Stocks?
In finance, leverage refers to the use of borrowed capital to support business operations and drive expansion. Companies typically raise such funds through debt financing, although equity financing remains an alternative. However, firms often prefer debt due to its relatively lower cost and easier availability compared to issuing equity.
Debt financing comes with inherent risks and is beneficial only when it generates returns that exceed the cost of borrowing. To limit downside risk, investors should be cautious of companies that rely excessively on debt. Prudent investing involves selecting businesses with manageable leverage, as completely debt-free companies are rare.
The equity market can be volatile at times. As an investor, if you want to avoid significant losses, we suggest focusing on stocks with low leverage, which are generally deemed less risky.
To identify such stocks, several leverage ratios have historically been developed to measure the amount of debt a company carries. The debt-to-equity ratio is among the most widely used financial ratios.
Analyzing Debt/Equity
Debt-to-Equity Ratio = Total Liabilities/Shareholders’ Equity
This metric is a liquidity ratio that indicates the amount of financial risk a company bears. A lower debt-to-equity ratio suggests improved solvency for a company.
With the second-quarter 2026 earnings season in its mid-way, investors should focus on stocks that have demonstrated solid earnings growth in recent periods.
If a stock carries a high debt-to-equity ratio during an economic downturn, its seemingly strong earnings could quickly turn into a nightmare.
The Winning Strategy
Considering the aforementioned factors, it would be prudent to choose stocks with a low debt-to-equity ratio to ensure steady returns.
Yet, an investment strategy based solely on the debt-to-equity ratio might not fetch the desired outcome. To select stocks with the potential to provide steady returns, we have expanded our screening criteria to include additional factors.
Other Parameters:
Debt/Equity Less Than X-Industry Median: Stocks that are less leveraged than their industry peers.
Current Price Greater Than or Equal to 10: The stocks must be trading at $10 or higher.
Average 20-day Volume Greater Than or Equal to 50000: A substantial trading volume ensures that the stock is easily tradable.
Percentage Change in EPS F(0)/F(-1) Greater Than X-Industry Median: Earnings growth adds to optimism, leading to a stock’s price appreciation.
VGM Score of A or B: Our research shows that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential.
Estimated One-Year EPS Growth F (1)/F(0) Greater Than 5: This shows earnings growth expectations.
Zacks Rank #1 or 2: Irrespective of market conditions, stocks with a Zacks Rank #1 or 2 have a proven history of success.
Excluding stocks that have a negative or a zero debt-to-equity ratio, we present our five picks out of the 13 that made it through the screen.
Ternium: It is the leading producer of steel products in Latin America and consolidates the operations of steel companies like Hylsa in Mexico, Siderar in Argentina and Sidor in Venezuela. On July 8, 2026, Ternium released its Sustainability Report 2025, presenting the company's performance, strategy, governance and risk management across key environmental, social and governance (ESG) dimensions.
Per this report, in 2025, Ternium invested $93 million in environmental, decarbonization and energy-efficiency initiatives, and $102 million in occupational health and safety programs. Looking ahead, the company aims to achieve a 15% reduction in CO2 equivalent emissions intensity per ton of hot-rolled steel equivalent by 2030.
The Zacks Consensus Estimate for TX’s 2026 sales indicates an improvement of 11.8% from the prior-year reported level. The stock boasts a long-term (three-to-five year) earnings growth rate of 48.70%. It currently sports a Zacks Rank #1.
Casey’s General Stores: It is a chain of convenience stores that operates primarily under the Casey's and Casey's General Store names in 19 U.S. states, mainly Iowa, Missouri, and Illinois. On June 24, 2026, the company unveiled its new three-year strategic plan.
The plan includes Casey’s continued investment in its made-to-order offerings, including pizza and chicken wings, as well as expansion of its private-brand portfolio. The company also aims to add at least 400 stores through a combination of strategic acquisitions and new-store development.
The Zacks Consensus Estimate for CASY’s fiscal 2027 revenues indicates an improvement of 16.6% from the prior-year reported numbers. The stock boasts a long-term earnings growth rate of 15.80%. CASY currently holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Amalgamated Financial: It is the holding company for Amalgamated Bank, which provides commercial banking and trust services nationally. On July 23, 2026, the company announced its second-quarter 2026 results.
AMAL’s operating revenues improved a solid 17% year over year to $96.1 million, while its earnings per share of $1.10 surged 25%. Its net interest margin expanded 3 basis points on a sequential basis, driven by interest income from the origination of higher-yielding commercial loans and newly purchased AFS securities.
The Zacks Consensus Estimate for AMAL’s 2026 revenues indicates an improvement of 13.8% from the prior-year reported number. The Zacks Consensus Estimate for AMAL’s 2026 earnings indicates an improvement of 7.7% from the prior-year reported number. It currently holds a Zacks Rank #2.
Hippo Holdings: It offers a different approach to home insurance, built from the ground up to deliver a new standard of care and protection for homeowners. On June 30, 2026, Hippo Holdings announced an enhanced partnership with Accelerant, a data-driven risk exchange platform for the specialty insurance market.
As part of this partnership, effective July 1, 2026, with the full program launching on Oct. 1, 2026, Hippo will serve as the fronting carrier for more than $500 million in annual gross written premiums across Accelerant's U.S. portfolio beginning in 2027. With this agreement in place, HIPO expects to achieve its $2 billion gross written premium target in 2027, a year ahead of the plan.
The Zacks Consensus Estimate for HIPO’s 2026 revenues suggests an improvement of 20.9% from the year-ago reported level. The Zacks Consensus Estimate for HIPO’s 2026 earnings indicates an improvement of 170.6% from the prior-year reported number. It currently holds a Zacks Rank #2.
RB Global Inc.: It is an omnichannel marketplace that provides value-added insights, services and transaction solutions for buyers and sellers of commercial assets and vehicles. On July 16, 2026, the company released record results for the 2026 Australia National End of Financial Year (“EOFY”) Auctions, held across the company's national network of yards.
The auction attracted more than 2,300 buyers, with the largest share of domestic participation coming from Victoria, New South Wales and Queensland. International buyers also participated, with transactions originating from countries including the United States, New Zealand and Egypt. The auctions together generated over AU$100 million in gross transaction value (GTV), marking an extraordinary milestone for Ritchie Bros.’ Australian footprint (Ritchie Bros. is part of RBA).
The Zacks Consensus Estimate for RBA’s 2026 revenues indicates an improvement of 6.6% from the prior-year reported actuals. The stock boasts a long-term earnings growth rate of 15.40%. It currently holds a Zacks Rank #2.
Why Haven't You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Ternium S.A. (TX): Free Stock Analysis Report
RB Global, Inc. (RBA): Free Stock Analysis Report
Casey's General Stores, Inc. (CASY): Free Stock Analysis Report
Amalgamated Financial Corp. (AMAL): Free Stock Analysis Report
Hippo Holdings Inc. (HIPO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).