Why Some American Muslims Skip the Debt Rule and Buy Only Zero Debt Stocks

Most halal investing guides give you the same list of mega caps. Apple, Microsoft, Nvidia, Tesla. Those are fine, and most American Muslim screeners pass them. But there is a smaller, more conservative school of halal investing that says you should not stop at the 33 percent debt rule. You should go further. You should look for the rare US companies that carry essentially zero interest bearing debt at all.

This guide explains why some Muslim scholars and investors prefer that stricter standard, walks through four debt free or near zero debt halal stocks listed on the New York Stock Exchange, and shows you how to buy them through a normal American brokerage account. Names and numbers in this article are current as of early 2026 and should be re-verified before you trade.

Why bother going debt free

The mainstream halal screening rule comes from AAOIFI Shariah Standard No. 21 and several index providers. It says a company is acceptable to own if its interest bearing debt sits below roughly 30 to 33 percent of market capitalization, its cash and interest bearing securities sit below the same threshold, and its non-permissible income stays under 5 percent of total revenue. Mufti Faraz Adam and most US Shariah index providers, including the screens behind SP Funds SPUS and the FTSE USA Shariah index that powers Wahed HLAL, accept this 30 to 33 percent threshold as a practical compromise.

Some scholars and investors push further. Their argument is that any interest bearing debt is, by definition, exposure to riba. The 30 percent allowance is a concession built around the realities of modern markets, not a positive endorsement of leverage. So if you can find quality companies that operate without conventional debt at all, you sidestep the question entirely.

The trade off is real. Debt free companies are rare. Many of them are smaller than the giants. You will likely build a more concentrated portfolio than you would with a broad halal ETF. That can mean more volatility and more research work. It can also mean better alignment with the spirit of the rule and, in some cases, more resilient balance sheets when interest rates rise or credit markets seize up.

How we identified the names

The four companies discussed below were screened against three layers. First, debt to EBITDA below 0.1, drawn from public balance sheet data sourced through services like Stock Unlock and verified against SEC 10-K filings. Second, primary listing on the New York Stock Exchange or NYSE-affiliated venues so American Muslim investors can buy them through any standard US broker. Third, screening on Zoya or Musaffa as halal compliant on the date of writing. You should re-verify each one yourself before you place a trade. Halal status changes over time as a company's filings change.

None of this is a recommendation. It is education. Past performance is not future performance. Any of these names could change their balance sheet, business mix, or compliance status next quarter.

1. Pegasystems (PEGA), enterprise software with a fortress balance sheet

Pegasystems builds workflow automation and customer relationship software for large enterprises and government agencies. It runs on a debt to EBITDA of essentially zero, with a return on equity around 50 percent and consistent free cash flow margins.

From a halal perspective, software companies are usually clean. Pegasystems generates revenue almost entirely from subscriptions and license fees, with negligible exposure to interest income or non-permissible business lines. Its market cap of roughly $6 billion makes it a mid cap, which can mean more volatility than a mega cap, but it has a deep moat with embedded enterprise customers.

Why this name fits

• No interest bearing debt to speak of, which removes the 33 percent question entirely.
• Revenue model is recurring software subscriptions, far from any haram industry.
• Enterprise software has historically been one of the most defensible sectors in market downturns.

2. Exelixis (EXEL), focused biotech with cash and no debt

Exelixis is a biopharmaceutical company best known for its oncology franchise around cabozantinib, sold under brand names like Cabometyx. It has built a substantial cash pile while keeping interest bearing debt at zero, and posts free cash flow margins above 35 percent on a market cap of roughly $11 billion.

Biotech is one of the cleaner halal sectors when you avoid companies with significant exposure to non-permissible products. Exelixis sticks to oncology and rare disease therapeutics, which are core medical work. The cash pile, technically a slight downside under AAOIFI's cash to market cap rule if cash exceeded 30 percent, sits well within compliance.

Risks worth knowing

• Biotech revenue concentrates in a few drugs. A single trial failure or patent challenge can move the stock significantly.
• Always re-screen biotech for changes in licensing or partnerships, since deals can introduce non-compliant elements.

3. Palomar Holdings (PLMR), a debt free specialty insurer

Insurance is one of the trickiest halal categories, and most conventional insurers fail screens because of the heavy interest income on their float. Palomar Holdings is unusual. It writes specialty property insurance for earthquake, hurricane, and other catastrophic risk. Its market cap of roughly $3.3 billion runs on essentially no balance sheet debt, with returns on equity over 20 percent and strong free cash flow.

Note carefully. Conventional insurance is itself viewed as non-compliant by most scholars because of gharar and interest exposure. If you follow the AAOIFI mainstream screens, Palomar typically passes the formula screens but most halal screening providers, including Wahed and Zoya, exclude conventional insurers as a categorical industry exclusion. We mention Palomar here because some Muslim investors who follow narrower financial-only screens still own it. If you follow a categorical screen, skip this one and move to the next.

4. ServisFirst Bancshares (SFBS), and why most banks are off the list

Most banks are not halal because their core business is conventional lending and interest collection. The financial industry exclusion knocks out the entire JPMorgan, Bank of America, Wells Fargo cluster regardless of leverage. ServisFirst Bancshares shows up in low-debt screens because of its conservative balance sheet, but it is a conventional commercial bank and will fail any standard halal industry exclusion.

We are listing it as a teaching example. When you screen for low debt names, banking and financial services dominate the top of the list. That is not because they are halal, it is because the formula does not capture industry exclusions on its own. Always run an industry exclusion check, not just a numbers check. Tools like Zoya and Musaffa apply both layers automatically, so they will mark these names as non-compliant even if a generic low debt screen does not.

How to actually buy these

1. Open a brokerage account at Fidelity, Charles Schwab, or any major US broker. A Roth IRA wrapper is ideal for long term US Muslim investors under the income phase-out limits, since growth and qualified withdrawals are tax free.
2. Verify each ticker on Zoya, Musaffa, or another Shariah screener on the day you intend to buy.
3. Place limit orders, never market orders, especially on small and mid caps.
4. Diversify. Even within a debt free philosophy, owning five names is more concentrated than owning HLAL, SPUS, or AMAGX. Many investors blend a debt free satellite portfolio with a core position in a screened ETF.
5. Re-screen every quarter, after each company's 10-Q or 10-K filing. Halal compliance can flip if a company takes on a major credit facility or acquires a non-compliant subsidiary.

A simple debt-free starter portfolio

For a US Muslim investor who wants to lean into the strict debt-free school, here is one possible structure inside a Roth IRA. Allocations are illustrative, not advice.

• 60 percent in a screened ETF like HLAL or SPUS for diversified halal core exposure.
• 20 percent across two or three zero debt enterprise software, biotech, or industrial names verified on Zoya.
• 10 percent in physical gold ETFs like GLDM or IAU for long term inflation hedge.
• 10 percent in cash held in a non-interest checking account or short term Shariah compliant cash equivalent.

This blended structure gives you the balance most halal financial planners recommend. You get the broad market exposure of the standard screens through the ETF core, plus a satellite of strict debt free names that aligns more closely with the conservative school of halal investing. You also keep gold for stability and cash for opportunity.

The takeaway

The 33 percent debt rule is a real, practical compromise that lets American Muslims own most of the S&P 500 in a halal way. The strict debt-free school is a smaller, more conservative path that lets you sidestep the question altogether. Both are legitimate, and many investors do both. The work is in the screening discipline. Verify before you buy, re-verify every quarter, and never trust a single screener without a second look.

Pick the school of thought that lets you sleep, build the portfolio that fits your life, and let the compounding take it from there.

Disclaimer: HalalWorthy publishes educational content. We are not a financial advisor, and nothing in this article constitutes personal financial, tax, or legal advice. Halal compliance of any product changes over time and varies by scholar. Always verify with a qualified Shariah advisor and a licensed fiduciary before making financial decisions.