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Bogged Down by Volatility? Count On 5 Low Beta Stocks

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Can you beat the market without taking risk? While there are many proponents of “No risk, no reward,” it must be remembered that this theory will take you to the moon when the market is on a bull run. But what happens if the market trends down? Your portfolio returns will slide along with the market. So, it’s best to create a portfolio of low-risk stocks that are inherently less volatile than the markets they trade in. This makes them safer options any day.

Beta Understanding

Beta indicates the volatility of a particular stock with respect to the market. In other words, beta measures the extent of stock price movement relative to the market (we are considering the S&P 500 here).

If a company has a beta of 1, it means that the relative volatility of the stock is the same as that of the S&P 500. In the same way, if the stock’s beta is greater than 1 then it is more volatile than the market. Conversely, a beta below 1 signifies less volatility.

Now, if a portfolio’s beta is 3, it is three times more volatile than the market. Hence, if the market is projected to give 20% return, the portfolio will then definitely contribute 60% return which is amazing.

However, the opposite case also holds true. If the market slips 20% then the portfolio return plummets 60% which is surely a matter of concern.

The Winning Strategy

In our screening criteria we included beta in the range of 0 to 0.6 for short listing low risk stocks. But this can’t be the only criterion for betting on stocks. The other parameters that need to be added to create a winning portfolio are:

Percentage Change in Price in the Last 4 Weeks greater than zero: This ensures that the stocks saw positive price movement over the last one month.

Average 20 Day Volume greater than 50,000: A substantial trading volume ensures that the stocks are easily tradable.

Price greater than or equal to $5: They must all be trading at a minimum of $5 or higher.

Zacks Rank equal to 1: Zacks Rank #1 (Strong Buy) stocks indicate that they will significantly outperform the broader U.S. equity market over the next one to three months.

Here are five of the 19 stocks that qualified the screening:

B&G Foods Inc. (BGS - Free Report) is involved in manufacturing and distributing frozen and shelf-stable foods along with household products across the U.S., Canada and Puerto Rico. The company surpassed the Zacks Consensus Estimate in three of the last four quarters, with a positive average surprise of 10.89%. For 2016, B&G Foods’ earnings are projected to improve 44.8% year over year.

Burlington Stores Inc. (BURL - Free Report) is a retailer of apparel products like baby products, menswear, youth apparel, footwear, coats, accessories, home goods and women's ready-to-wear apparel. In each of the last four quarters, the company surpassed the Zacks Consensus Estimate, with an average beat of 23.2%. Moreover, the firm’s projected earnings growth for fiscal year 2016 is 24.6% year over year.

The Children's Place Inc. (PLCE - Free Report) is a retailer of branded apparel items for children that include footwear, accessories and other products. For the last four quarters, the company delivered an average positive earnings surprise of 9.11%. For fiscal 2016, the company’s earnings are expected to grow almost 17.2% over the prior year.

Richmont Mines Inc. is primarily involved in the exploration and development of Canadian mining resources. For 2016, the company’s earnings are expected to grow a staggering 144.4% over the prior year. Moreover, over the last 30 days, the Zacks Consensus Estimate for second-quarter 2016 earnings saw an increase of 25%.

DigitalGlobe Inc. (DGI - Free Report) is a provider of commercial high-resolution earth imagery products and services globally. The company delivered an average positive earnings surprise of 351.34% for the last four quarters. For 2016, the company’s earnings are projected to grow 52.6% year over year.

You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

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 are available at: https://www.zacks.com/performance/.


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