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Most investors believe that one has to bear risks for achieving higher returns. Of course this rule works brilliantly when the market is on a bull run. But investors also have to think of how to navigate a bearish territory. Hence, it is better to create a low risk portfolio, so that the chosen stocks are less prone to market risks, with a combination of some other parameters in order to get solid returns.
Meaning of Beta
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 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 compared to 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.
Here are five of the 10 stocks that qualified the screening:
Primo Water Corporation (PRMW - Free Report) is the provider of multi-gallon purified bottled water along with water dispensers in the U.S. and Canada. In the last four quarters, the company posted an average positive earnings surprise of 270.00%. Most importantly, for the current year, the company’s earnings are expected to grow almost 140% over the prior year.
Fresh Del Monte Produce Inc. (FDP - Free Report) is the producer, marketer and distributer of fresh-cut fruits and vegetables all over the world. For the current year, the company’s earnings are projected to grow almost 70% year over year.
PRA Health Sciences, Inc. is the provider of outsourced clinical development services to the biotechnology and pharmaceutical industries throughout the world. Notably, the company surpassed the Zacks Consensus Estimate in each of the prior four quarters, at an average of 12.97%. Additionally, for the current year, the company is expected to deliver earnings representing year-over-year growth rate of 23.5%.
Cooper Tire & Rubber Co. is the manufacturer and marketer of replacement tires all over the world. The company is expected to post year-over-year earnings growth of 16.5%. Moreover, over the last four quarters, the company posted an average positive earnings surprise of 22.13%
Lumentum Holdings Inc. (LITE - Free Report) is the manufacturer and seller of optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company posted an average positive earnings surprise of 24.47% over the trailing four quarters. Moreover, the company is projected to post year-over-year earnings growth of 64% for the current 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.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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5 Low Beta Stocks to Endure a Volatile Market
Most investors believe that one has to bear risks for achieving higher returns. Of course this rule works brilliantly when the market is on a bull run. But investors also have to think of how to navigate a bearish territory. Hence, it is better to create a low risk portfolio, so that the chosen stocks are less prone to market risks, with a combination of some other parameters in order to get solid returns.
Meaning of Beta
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 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 compared to 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. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Here are five of the 10 stocks that qualified the screening:
Primo Water Corporation (PRMW - Free Report) is the provider of multi-gallon purified bottled water along with water dispensers in the U.S. and Canada. In the last four quarters, the company posted an average positive earnings surprise of 270.00%. Most importantly, for the current year, the company’s earnings are expected to grow almost 140% over the prior year.
Fresh Del Monte Produce Inc. (FDP - Free Report) is the producer, marketer and distributer of fresh-cut fruits and vegetables all over the world. For the current year, the company’s earnings are projected to grow almost 70% year over year.
PRA Health Sciences, Inc. is the provider of outsourced clinical development services to the biotechnology and pharmaceutical industries throughout the world. Notably, the company surpassed the Zacks Consensus Estimate in each of the prior four quarters, at an average of 12.97%. Additionally, for the current year, the company is expected to deliver earnings representing year-over-year growth rate of 23.5%.
Cooper Tire & Rubber Co. is the manufacturer and marketer of replacement tires all over the world. The company is expected to post year-over-year earnings growth of 16.5%. Moreover, over the last four quarters, the company posted an average positive earnings surprise of 22.13%
Lumentum Holdings Inc. (LITE - Free Report) is the manufacturer and seller of optical and photonic products in the Americas, the Asia-Pacific, Europe, the Middle East, and Africa. The company posted an average positive earnings surprise of 24.47% over the trailing four quarters. Moreover, the company is projected to post year-over-year earnings growth of 64% for the current 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/.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »