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For generating handsome returns, one has to invest in risky stocks. This seems to be a thumb rule for most investors. The strategy works extremely well for securities or portfolios that are directly correlated with the market. But the converse scenario should also be taken into account.
With extensive research we have come up with a strategy that proves lucrative returns could also be generated from less risky stocks.
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.
Here are five of the 15 stocks that qualified the screening:
Headquartered in AR, Tyson Foods, Inc. (TSN - Free Report) was founded in 1935. It is the biggest U.S. chicken company and produces, distributes and markets chicken, beef, pork as well as prepared foods. The company is expected to report year-over-year earnings growth of 18.2% for fiscal 2017. Also, the Zacks Consensus Estimate for fourth-quarter fiscal 2017 has been revised upward over the last 30 days.
Based in Paramus, NJ, Movado Group, Inc. (MOV - Free Report) is a leading distributer of fine watches all over the world. The company posted an average positive earnings surprise of 2.54% for the last four quarters. Also, we are expecting Movado Group to witness year-over-year earnings growth of 2% for fiscal 2018.
Headquartered in Salt Lake City, UT, Myriad Genetics, Inc. (MYGN - Free Report) employs a number of proprietary technologies to target the genetic basis of human diseases. The company managed to beat the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 6.17%.
PRA Health Sciences, Inc. headquartered in Raleigh, NC, is the leading provider of outsourced services related to clinical developments. The company surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters with an average positive surprise of 6.10%. PRA Health is projected to report year-over-year earnings growth of 26.3% for 2017.
Based in Greenwich, CT, Urstadt Biddle Properties Inc. is the leading investor in the U.S. real estate market. The firm surpassed the Zacks Consensus Estimate in three of the last four quarters with an average positive earnings surprise of 6.03%. Moreover, for fiscal 2017, Urstadt Biddle will likely post year-over-year earnings growth of 123.2%.
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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Buy 5 Low-Beta Stocks & Forget Market Volatility
For generating handsome returns, one has to invest in risky stocks. This seems to be a thumb rule for most investors. The strategy works extremely well for securities or portfolios that are directly correlated with the market. But the converse scenario should also be taken into account.
With extensive research we have come up with a strategy that proves lucrative returns could also be generated from less risky stocks.
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.
Here are five of the 15 stocks that qualified the screening:
Headquartered in AR, Tyson Foods, Inc. (TSN - Free Report) was founded in 1935. It is the biggest U.S. chicken company and produces, distributes and markets chicken, beef, pork as well as prepared foods. The company is expected to report year-over-year earnings growth of 18.2% for fiscal 2017. Also, the Zacks Consensus Estimate for fourth-quarter fiscal 2017 has been revised upward over the last 30 days.
Based in Paramus, NJ, Movado Group, Inc. (MOV - Free Report) is a leading distributer of fine watches all over the world. The company posted an average positive earnings surprise of 2.54% for the last four quarters. Also, we are expecting Movado Group to witness year-over-year earnings growth of 2% for fiscal 2018.
Headquartered in Salt Lake City, UT, Myriad Genetics, Inc. (MYGN - Free Report) employs a number of proprietary technologies to target the genetic basis of human diseases. The company managed to beat the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 6.17%.
PRA Health Sciences, Inc. headquartered in Raleigh, NC, is the leading provider of outsourced services related to clinical developments. The company surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters with an average positive surprise of 6.10%. PRA Health is projected to report year-over-year earnings growth of 26.3% for 2017.
Based in Greenwich, CT, Urstadt Biddle Properties Inc. is the leading investor in the U.S. real estate market. The firm surpassed the Zacks Consensus Estimate in three of the last four quarters with an average positive earnings surprise of 6.03%. Moreover, for fiscal 2017, Urstadt Biddle will likely post year-over-year earnings growth of 123.2%.
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 »