Best shariah compliant halal stocks to buy in 2024
This guide gives you our best stock picks for investing in halal companies that comply with Islamic principles and laws for Muslim investors. Our experts have analysed the markets to choose these companies, and you can read on to find out more about why we’re excited by them.
What are the top halal stocks to buy?Copy link to section
Here are our picks for the best shariah compliant stocks this year. You can find their latest stock price by following the links in the table or scroll down for a more detailed halal stocks list.
|#||Stock symbol||Company name||Trade now|
|2||TJX||TJX Companies, Inc.|
|3||ADP||Automated Data Processing, Inc.|
|5||TXN||Texas Instruments Incorporated|
1. Abbott Laboratories (NYSE: ABT)Copy link to section
Abbott Labs is a healthcare and medical devices company based in the US that rates as our top halal stock. It dates all the way back into the 19th century, and its main source of revenue over the years has been from nutritional products for children and adults. The company manufactures diagnostic testing equipment, and medical devices like heart pumps.
It soared to prominence in 2020 as one of the leading manufacturers of coronavirus testing kits. It was one of the first to offer a rapid-testing kit, and by the end of the year was producing antibody tests as well. That helped the stock price climb 30% in 2020 and hit highs of $130 in early 2021.
Abbott has made this list because it’s a well-rounded business. It tripled its operating income in three years up to the pandemic, increased revenues by 25%, and net profit margin by 15%. This is a solid company with a diverse income stream, and its medical devices division in particular is primed for rapid growth in a post-pandemic world.
2. TJX Companies, Inc. (NYSE: TJX)Copy link to section
TJX is a multinational company that runs cut-price retail stores in Europe and North America. It owns the TJMaxx/TKMaxx chain, as well as other outlets like Marshalls, Homesense, and Sierra.
It has been a consistent performer in the financial markets for many decades, but the pandemic threw a wrench into the works because the stores rely on foot traffic. Despite an extremely difficult year, the share price actually finished 2020 higher than it started, a testament to the company’s ability to weather a difficult environment.
That is what has earned TJX a spot on our list of the best halal stocks. It’s used the opportunity of other stores closing down to add new clothing lines, while it’s been able to relocate some stores into better locations. As a consistent performer for so long, it’s now perfectly placed to keep growing as the pandemic lockdowns ease off and people return to the high street.
3. Automatic Data Processing, Inc. (NASDAQ: ADP)Copy link to section
ADP creates software that helps companies run the admin side of their business. Generally, this takes the form of things like payroll processing and human resource management software.
It’s a company that relies on high levels of employment to maintain revenues, so the pandemic year was a tough one. Despite that, however, the stock really began to recover with the arrival of successful vaccines, and stretched its record of raising the dividend to 47 years in a row.
That makes ADP a member of the Dividend Aristocrats Club, and helps earn it a place as a top halal stock. It has nearly half a century’s worth of evidence of offering value to its shareholders, and it’s a company that stands to benefit as employment numbers climb in the aftermath of the pandemic.
4. JD.com (NASDAQ: JD)Copy link to section
JD.com is a Chinese ecommerce company that stands as a rival to the internet giant, Alibaba. It started out selling electronics out of a bazaar in Beijing, but now sells almost everything online, from home furniture to groceries.
As with many online retailers, its business boomed during the pandemic. The share price more than doubled as gross revenue grew by 30%. Over the course of the year, it was also able to raise more than $12bn in a variety of new stock market listings for other companies it owns.
JD has been able to agree strategic partnerships with huge companies like WalMart and Alphabet, and its product range is enormous. It wants to use these partnerships to improve its supply chain, as well as the technology and services it can supply. That’s what has made JD one of our best halal stocks, as it aims to become something like the Chinese version of Amazon.
5. Texas Instruments Incorporated (NASDAQ: TXN)Copy link to section
Texas Instruments is an American company that manufactures semiconductors for a wide range of industries. Crucially, it’s an IDM – integrated device manufacturer – which means it makes its own chips rather than outsourcing them.
That has helped TI avoid the worst of the global semiconductor shortage. And while TI’s chips aren’t as cutting-edge as the ones produced by Intel and Nvidia, they are cheaper and easier to make. TI has become very good at it what it does: the share price has been growing steadily for a decade and has doubled since the March 2020 crash.
The fact its chips aren’t as advanced is what’s helped TI earn a spot on this list. It isn’t reliant on spending more and more on research and development to keep up. Instead, it tends to return its money back to shareholders. It’s raised the dividend for 17 years in a row and regularly performs share buybacks, making it a great long term, reliable investment.
Where to buy the best Islamic sharesCopy link to section
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What is an Islamic stock?Copy link to section
A company that complies with the fundamental principles of Islamic law. Shariah compliant stocks don’t operate with haram (forbidden) products like pork or alcohol, don’t involve gambling or interest-based financial products, and don’t take on excessive risk. Halal investing means you can only invest in shariah compliant companies that abide by the rules of Islamic finance.
The important thing to note is that while the primary activity of the company cannot be in any of those fields, there is room for interpretation. All of the stocks on this page comply with the Islamic financial principles laid out by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
According to those rules, to qualify as a halal investment, the revenue that comes from forbidden products cannot exceed 5% of the total, interest-bearing debt does not exceed 30% of the market cap, and the total amount of interest-bearing securities does not exceed 30% of the market cap.
Are shariah compliant companies a good investment?Copy link to section
If you want to create a portfolio that fits in with your religious beliefs as a Muslim investor, then halal stocks are the way to go. But shariah compliant investments can also be good choices for people outside the Islamic faith as well: finding companies with ethical business practices that don’t take on much risk is a good recipe for success on the stock market.
The top halal stocks are relatively easy to find and there are a variety of Sharia stock screeners you can use to do most of the research for you. The screeners analyse each company’s balance sheet and business practices to assign it a score based on its Sharia principles and compliance status. If you still aren’t sure, there are a variety of Islamic finance institutions or Islamic scholars to help you.
Ultimately, although a focus on halal investments excludes some companies, there are a lot of stocks out there that do fit halal investing practices. Look for companies that offer tangible products and a positive contribution to the world to avoid running into issues, and then use a stock screener to confirm whether it qualifies as a halal stock.
FAQsCopy link to section
Opinions vary because it’s not always clear how to break down Apple’s revenue. Some people think Apple is halal because less than 5% of its revenue comes from forbidden items, but on the other hand it’s difficult to know where its App Store revenue comes from and how much might be from forbidden sources. Apple also has a credit card which charges interest on unpaid monthly bills, which could be considered haram.
Yes, the general consensus is that Tesla is halal and a sharia compliant stock. The vast majority of its revenue comes from automobile sales and renewable energy, and only a small (less than 5%) amount of its revenue is considered haram.
No, AMC is not a halal stock.
The S&P 500 Shariah index complies with Islamic law and is considered halal for many Muslim investors.
It screens companies from the S&P 500 according to Shariah principles, excluding those with high debt or involved in haram activities like alcohol, tobacco, pork products, conventional financial services, weapons, gambling, and adult entertainment.
The S&P 500 Shariah only includes companies with business models, balance sheets, and operations that align with Islamic values. This makes it one of the best halal indexes and a popular choice for Sharia-compliant funds.
Louis Vuitton may be permissible for Muslim investors as the luxury retailer does not appear to violate Shariah principles. Louis Vuitton generates most of its net profit margin from retail sales of leather goods, fashion, watches, jewellery, accessories, perfumes, and cosmetics.
These are generally considered halal products. However, like many large public companies, Louis Vuitton may hold some interest-bearing debt on its balance sheet. But this is likely to be a small percentage of its total assets. Louis Vuitton’s core business model and main sources of income generated are Shariah compliant.
But you should be aware that its holding company LVMH Moet Hennessy, is not halal.
Pfizer is likely halal as the global pharmaceutical giant does not violate major Islamic principles. While Pfizer holds some debt, its core business is producing and marketing pharmaceutical products and vaccines. The healthcare sector is generally deemed permissible.
However, some conservative scholars argue that drug companies may indirectly profit from haram activities. However, Pfizer has a clean business model and robust Shariah compliance for most Muslim investors. Its huge market cap and revenue make it a favourite halal stock pick.
Berkshire Hathaway is generally considered halal as its primary business is insurance, reinsurance, utilities and manufacturing operations through subsidiaries. It avoids non-compliant industries and has minimal interest-bearing debt.
Since Berkshire Hathaway is a massive conglomerate holding company with many diverse businesses, some minor haram revenue exposure may exist. Its core operations and solid financial profile mean most Muslim investors approve Berkshire Hathaway stock for Shariah-compliant portfolios.
Yes, Nike is Shariah compliant and fits guidelines for halal stocks. Nike is one of the world’s largest sports apparel and footwear brands. All of Nike’s main business operations and revenue sources are halal, including product design, manufacturing, marketing and sales of athletic shoes, sports equipment and apparel.
No, the FTSE 100 index is not entirely haram. The FTSE 100 includes the largest 100 UK-listed companies by market capitalization. While it includes some non-halal stocks, many component companies are Shariah compliant regarding low debt and avoiding prohibited sectors like alcohol, tobacco, weapons or gambling.
Conservative Muslim investors may still wish to screen for halal stocks within the FTSE 100.
There is some flexibility, but Muslims generally avoid investing in interest-bearing debt instruments like conventional bonds or interest-bearing deposits, which are considered haram.
However, some conservative Shariah-compliant debt alternatives exist, including Islamic bonds structured without interest. Many Islamic scholars say some flexibility is allowed if interest-bearing debt exposure is minimal
There is no universal maximum debt threshold that categorically makes a stock halal or haram. Scholars look at debt ratios and whether the core business model aligns with Shariah principles. Stocks with debt below 33% of their market capitalisation are generally preferred.
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