Major U.S. stock indices ended July 10, 2026, on an optimistic note, supported by broad-based buying in banking shares. Meanwhile, South Korean chip giant SK Hynix stole the spotlight, soaring nearly 13% in its historic $26.5 billion Wall Street ADR debut and injecting a fresh wave of optimism into the tech-heavy Nasdaq.
While this milestone might encourage investors to chase high-growth tech stocks, escalating weekend altercations between the U.S. and Iranian forces in the Middle East threaten to trigger a sudden market pullback.
Against this highly uncertain macro backdrop, 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, Albemarle Corp. ALB, Everus Construction Group ECG, TAT Technologies TATT and Sunstone Hotel Investors SHO. 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 first lap, 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 15 that made it through the screen.
Ternium: It is the leading producer of steel products in Latin America and consolidates the operations of the steel companies like Hylsa in Mexico, Siderar in Argentina and Sidor in Venezuela.
The Zacks Consensus Estimate for TX’s 2026 sales indicates an improvement of 9.9% from the prior-year reported level. The stock boasts a long-term (three-to-five year) earnings growth rate of 52.80%. It currently sports a Zacks Rank #1.
Albemarle: It is a leading producer of highly-engineered specialty chemicals geared to meet customer requirements across a bevy of end markets including petroleum refining, consumer electronics, energy storage, construction and automotive.
The Zacks Consensus Estimate for ALB’s 2026 revenues indicates an improvement of 19.2% from the prior-year reported actuals. The stock boasts a four-quarter average earnings surprise of 74.50%. ALB currently holds a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Everus Construction Group: It provides a full spectrum of construction services through its electrical and mechanical and transmission and distribution specialty contracting services, principally in the United States.
The Zacks Consensus Estimate for ECG’s 2026 revenues indicates an improvement of 17% from the prior-year reported number. The Zacks Consensus Estimate for ECG’s 2026 earnings indicates an improvement of 11.1% from the prior-year reported number. It currently holds a Zacks Rank #2.
TAT Technologies: It engineers advanced thermal management solutions and provides maintenance, repair, and overhaul (MRO) services for aircraft components. TAT Technologies’ offerings include cooling systems, Auxiliary Power Units (APUs), and landing gear services for commercial and military fleets.
The Zacks Consensus Estimate for TATT’s 2026 revenues suggests an improvement of 11.3% from the year-ago reported level. The Zacks Consensus Estimate for TATT’s 2026 earnings indicates an improvement of 11% from the prior-year reported number. It currently holds a Zacks Rank #2.
Sunstone Hotel Investors: It is a lodging real estate company that owns hotels primarily in the upper-upscale and upscale segments, primarily operated under franchises owned by nationally recognized companies, such as Marriott, Hilton, InterContinental and Hyatt.
The Zacks Consensus Estimate for SHO’s 2026 revenues indicates an improvement of 4.5% from the prior-year reported actuals. The stock boasts a long-term earnings growth rate of 4.90%. It currently holds a Zacks Rank #2.
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Sunstone Hotel Investors, Inc. (SHO): Free Stock Analysis Report
Albemarle Corporation (ALB): Free Stock Analysis Report
Ternium S.A. (TX): Free Stock Analysis Report
TAT Technologies Ltd. (TATT): Free Stock Analysis Report
Everus Construction Group, Inc. (ECG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).