Buy These 5 Low-Leverage Stocks Amid a Reversal of Santa Claus Rally

The three major U.S. stock indices slipped at the bourses on Dec. 29, 2025, led by a drop in big technology shares, including Oracle, Nvidia and Palantir Technologies. The move might have disappointed some investors who had been anticipating a “Santa Claus rally,” a seasonal pattern in which the S&P 500 typically gains during the last five trading days of the year and the first two trading days of the new year.

At this juncture, investors may want to favor safe-haven assets over high-growth technology stocks, given that declines in AI-driven tech names were a key reason behind the broader market sell-off. So, we recommend companies, such as Engie SA ENGIY, Hamilton Insurance Group HG, Hecla Mining HL, Resmed RMD and Siemens Energy SMNEY. These stocks carry low leverage and, therefore, may offer a safer option for investors seeking stability during periods of market turmoil.

Now, before selecting low-leverage stocks, let’s explore what leverage is and how choosing a low-leverage stock can help investors.

What’s the Significance of Low-Leverage Stocks?

In finance, leverage refers to the practice of borrowing capital to help companies run their operations smoothly and expand their business. 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 financing 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. To avoid considerable losses in your portfolio, it is advisable to avoid companies that rely excessively on debt financing.

The crux of safe investment lies in choosing a company that is not burdened with debt, as a debt-free stock is almost impossible to find.
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 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 one of the most common of these 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 reflects improved solvency for a company.

With the fourth-quarter 2025 earnings season ahead of us, investors should be eyeing stocks that have demonstrated solid earnings growth in recent periods.

However, 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 factors above, it is 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.

Here are the 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 a minimum of $10 or above.

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, here we present our five picks out of the 18 stocks that made it through the screen.

Engie: It engages in the power, natural gas, and energy services businesses. On Dec. 18, 2025, Engie announced that its largest onshore wind project globally and one of the largest in Latin America, Serra do Assuruá, has reached full commercial operations. This should bolster ENGIY’s position in the globally expanding wind energy market.

The Zacks Consensus Estimate for ENGIY’s 2025 earnings indicates an improvement of 28.5% from the prior-year reported actuals. It currently carries a Zacks Rank #2.

Hamilton Insurance Group: It underwrites specialty insurance and reinsurance risks, principally in Bermuda and internationally. On Nov. 4, 2025, the company released its third-quarter 2025 results. Its net premiums increased 16.5% from the year-ago quarter’s reported number, whereas its operating earnings of $1.20 per share represented a massive improvement from 16 cents per share in the third quarter of 2024.

The Zacks Consensus Estimate for HG’s 2025 revenues suggests an improvement of 20.8% from the year-ago quarter’s level. The Zacks Consensus Estimate for 2025 earnings implies an improvement of 6.3% from the year-ago quarter’s level. It currently sports a Zacks Rank #1.

Hecla Mining: The company is a leading low-cost U.S. silver producer with mines in Alaska and Idaho, and an expanding gold producer with operations in Quebec, Canada. On Dec. 1, 2025, Hecla Mining announced that its wholly owned subsidiary, Klondex Aurora Mine Inc., has received a Finding of No Significant Impact (“FONSI”) and Decision Notice from the U.S. Forest Service (“USFS”) for the Polaris Exploration Project in Mineral County, NV, clearing the way for exploration activities to commence in 2026. 

The Zacks Consensus Estimate for HL’s 2025 revenues suggests an improvement of 42.1% from the year-ago quarter’s level. The Zacks Consensus Estimate for 2025 earnings implies an improvement of 281.8% from the year-ago quarter’s level. It currently carries a Zacks Rank #2. 

Resmed: It is a well-known designer, manufacturer, and distributor in the worldwide market for generators, masks, and related accessories for the treatment of sleep-disordered breathing (SDB) and other respiratory disorders. 

On Dec. 8, 2025, ResMed announced that it received U.S. Food and Drug Administration (FDA) clearance for Personalized Therapy Comfort Settings (PTCS), which will be marketed as Smart Comfort. Smart Comfort is the first FDA-cleared AI-enabled medical device that recommends personalized comfort settings to help people with obstructive sleep apnea (OSA) initiate and adhere to CPAP therapy.

The Zacks Consensus Estimate for RMD’s fiscal 2026 sales suggests a year-over-year improvement of 8.4%. The stock holds a long-term (three-to-five years) earnings growth rate of 13.7%. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Siemens Energy: The company focuses on the design, development, manufacture and supply of products, installation and technologically advanced services, principally in the renewable energy sector with a focus on wind power plants. On Nov. 20, 2025, Siemens Energy announced its plans to repurchase its own shares worth up to approximately $6.9 billion (€6 billion) by the end of fiscal 2028.

The Zacks Consensus Estimate for SMNEY’s fiscal 2026 revenues indicates an improvement of 16.9% from the prior-year reported actuals. The Zacks Consensus Estimate for its fiscal 2026 earnings implies an improvement of 158.2% from the year-ago quarter’s level. It currently sports a Zacks Rank #1.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies is available at: https://www.zacks.com/performance.

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