Shariah Compliant Stocks in USA? Source: blog.islamicly.com
Halal Investment: List of Shariah Compliant Stocks in USA
There has been a long-standing demand from Shariah sensitive investors in the United States of America for Shariah-compliant equities available on US stock markets. In this blog we will help you explore more details about Shariah compliance of equities listed in America. Let us discuss a few basic stuff first relating to shariah investing.
What is Halal?
HALAL in Islam means permissible from a Shariah law perspective.
What is Shariah Compliant?
Shariah-compliant refers to those activities which are permissible in accordance with the Shariah principles.
Is investing in stocks Halal?
Yes, trading in equity stock of companies listed on stock exchanges are absolutely permissible with conditions that such companies qualify the Shariah screening standards set up by the Shariah Scholars.
What is the Shariah equity screening methodology?
Scholars and Shariah boards around the world have set up a set of rules to screen equities. Shariah Screening comprises of the below:
The first check is to screen the companies for the business they are involved in. To qualify the sector checks, the business of a company must not be involved in any of the prohibited activities like Alcohol, Conventional Financial services, Gambling, Pork related activities, Pornography, Tobacco, Advertising, Media and entertainment etc. Here, three scenario arises.
Here a small tolerance limit has been prescribed, i.e. if less than 5% of the company’s revenue comes from the non-permissible business activities, it is still deemed to have passed the sector compliance test.
Once a stock passes the sector checks, its financials are evaluated.
To pass the financial ratio checks, a company needs to pass the below ratios.
1- Leverage Ratio
Debt / Market Value of Equity (36 month average) < 33 %
2- Cash and Cash Equivalent Ratio
(Cash + Interest Bearing Securities) / Market value of Equity (36 month average) < 33%
3- Account Receivable Ratio
Accounts Receivables / Market value of Equity (36 month average) < 49 %
Companies that pass the sector checks, as well as these financial ratio checks, are considered to be Shariah Compliant and investments in such stocks are permissible as per the Shariah standards.
To view a detailed Shariah equity screening criteria please see this: Screening Criteria
List of Halal Stocks in USA
Many Islamic investors in the USA do not know whether the stocks listed on US Stock Exchanges are Shariah Compliant. Yes, a lot of listed companies in America are doing HALAL business and they have been classified as Shariah-compliant. You will be surprised to know that about 40% of total listed stocks in USA comply with Shariah Principles, as you can see in the graph below:
Shariah compliance of various business sectors in USA.
Listed Companies in the USA can be classified into 17 business sectors, broadly. Sector wise Shariah compliance of companies listed in the USA can be seen below:
|Sectors||% of Shariah Compliant Stocks||% of Shariah Not Compliant Stocks|
|Consumer Goods Non-Cyclical||41.27%||58.473%|
|Food & Beverages||28.18%||71.06%|
|Real Estate & Construction||21.17%||78.83%|
Shariah Compliant Stocks in USA- Sector Wise
Shariah Compliant Investment options in USA
Being a Shariah Sensitive investor, you have multiple options in America to make your investments in a
Shariah Compliant manner. Some Shariah compliant investment options are listed below:
1. Shariah Compliant equity stocks
2. Shariah Compliant Mutual Funds
3. Shariah Compliant ETFs
4. Shariah Compliant Indices
5. Shariah Compliant Sukuk
Some famous mutual funds, ETFs and Indices that follow Shariah principles are mentioned below.:
1. Falah Capital Iman Fund
2. Iman Fund
3. Wahed FTSE USA Shariah ETF (HLAL)
4. S&P 500 Shariah Stocks
5. Wahed S&P Shariah Fund
6. Halal Dividend Stocks
7. FTSE USA Shariah Index
Disclaimer: Islamicly has not verified the Shariah compliance authenticity of the above listed avenues. Please exercise your judgment before proceeding.
Stock Exchanges in USA
In USA, there are multiple stock exchanges. According to Wikipedia , there are 19 stocks exchanges as mentioned below:
|Boston Options Exchange||Boston|
|C2 Options Exchange||Chicago|
|Chicago Board Options Exchange||Chicago|
|CBOSE Stock Exchange - Ceased trading April 30, 2014||Chicago|
|Chicago Stock Exchange||Chicago|
|EDGA and EDGX||Chicago|
|IEX||New York City|
|ISE & ISE Gemini||New York City|
|Long Term STock Exchange||New York City|
|Members Exchange(MEMX)||Jersey City|
|Miami International Securities Exchange||Miami, Florida|
|NASDAQ||New York City|
|NASDAQ OMX BX||Boston|
|NASDAQ OMX PHLX||Philadelphia|
|New York Stock Exchange||New York City|
|NYSE Arca||New York City|
|NYSE American (formerly NYSE MKT and the American Stock Exchange)|
Two of the above US stock exchanges set an example for the world to follow in stock trading. Let us see those major and popular stock exchanges.
1- NYSE- The New York Stock Exchange
2- Nasdaq Stock Market
NYSE- The New York Stock Exchange
NYSE is an American stock Exchange that leads the world in stock markets. It's famous for being the largest stock exchange in the world, by market capitalization of its listed stocks. This stock exchange is unique in its style of having the nick name “The Big Board”.
The exchange was established in 1792 and got its current name in 1863. The Bank of New York was the first company that got listed on this exchange.
All classes of shares, stocks, bonds, mutual funds, derivatives and exchange traded funds as well as other financial instruments are traded.
The stock exchange has 5 markets to list different class of equities and stocks. Those markets are:
2. NYSE American
3. NYSE Acra Equities
4. NYSE Chicago
5. NYSE national
This exchange has lists stocks, ETFs, Indices and REITS in the below as below:
Listed instruments on NYSE
NYSE enables trading Equities for small, medium and large-cap companies as well as Bonds. It has listed approx. 6419 stocks and equities for trading.
Nasdaq Stock Exchange known as NASDAQ is an American stock exchange. NASDAQ is also very famous in the world and plays a key role in the capital market.
This is the second largest stock exchange by market capitalization of shares traded.
This is the first stock exchange that started as the world’s first electronic stock market. It operates three different market tiers:
1- Capital Market - It lists the equities of small market cap companies.
2- Global Market - It lists mid-cap equities from global markets and it has listed around 1450 mid cap stocks for trading.
3- Global Select Market – this lists only large-cap based stocks which represent Global Select Market Composite.
United States of America is the home of immigrants from different parts of the world. It consists of 50 states and 5 major self-governing territories. USA is the 4th largest country by total area and 3rd largest by population in the world. Total Population of USA is 330.57 million while the Muslim population is only 3.45 million around 1.04% of the population.
How can Islamicly help you find Shariah compliant stocks in USA?
Islamicly App is a single point of search for Halal stocks where you can search stocks to know their real time Shariah compliance.
Through this App, you can find Shariah compliant stocks, check the entire universe of stocks in USA for their Shariah compliance, create a portfolio of stocks of your choice and monitor their halal status as well as request for Shariah screening of stocks which might not be covered yet.
You can also participate in discussions happening on Islamicly app through the various forums on the app and you will find all sorts of handy information regarding this app in the profile section. Isn’t it amazing?
Here is the link to download Islamicly App
Do watch what one of the pioneering scholar of Islamic finance says about Islamicly here: