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Major stock indices in the United States ended on the green last Friday, following a key labor market data release, which came almost in line with market expectations. Notably, the latest data implied a 206,000 increase in nonfarm payrolls in June in the United States, which might have reignited Fed rate cut hopes among investors as reflected in an upward price movement in the share market. Against this backdrop, stock market players might be in the mood for some good investments.
However, since the share market has lately been on edge, we recommend stocks like Vital Farms VITL , PulteGroup PHM , Atmos Energy ATO , Steelcase SCS and Skechers SKX , which have low leverage. Choosing them can shield investors from incurring huge losses in times of crisis. Now, before selecting low-leverage stocks, let's explore what leverage is and how choosing a low-leverage stock helps investors.
In finance, leverage is a term used to denote the practice of borrowing capital by companies to run their operations smoothly and expand the same. Such borrowings are done through debt financing. But there remains an option for equity finance.
This is probably due to the cheap and easy availability of debt over equity financing. However, debt financing has its share of drawbacks. Particularly, it is desirable only as long as it successfully generates a higher rate of return compared to the interest rate.
So, to avoid considerable losses in your portfolio, one should always avoid .
