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Forget Market Volatility With These 5 Low-Beta Stocks
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The most common strategy is to invest in risky stocks with the hope of lucrative returns. The strategy works well only when the market is bullish, but investors should prepare mentally for the opposite scenario.
We have created a strategy which clearly shows that handsome returns could also be earned from stocks that are less volatile than the market.
Meaning of Beta
Beta measures the volatility or risks to a security relative to the market (we are considering the S&P 500 here). That is, beta measures the extent to which the price of a stock moves with respect to the market.
If the beta is equal to 1 it means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1.
For example, if the beta is 1.8 then the stock will witness 80% more movement than the market. Hence, we can say that if the market goes up, the stock will outperform by 80%. Conversely, if the market plunges, the stock will lose much more value than the market.
Building a Low-Risk Portfolio
In order to find stocks with lower-than-market volatility, we added beta between 0 and 0.6 as our main criterion for screening. However, we need to keep in mind that low beta is not the only metric to be considered for choosing stocks in a volatile market. Hence to reach the winning strategy, we have considered a few additional criteria.
Percentage Change in Price in the last 4 Weeks: We considered those stocks that saw positive price movement over the last month.
Average 20 Day Volume greater than or equal to 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 eight stocks that fit the bill:
Headquartered in Denton, TX,Sally Beauty Holdings, Inc. (SBH - Free Report) is the leading provider of professional beauty products. The company managed to surpass the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 2.7%. For fiscal 2018, the company will likely report year-over-year earnings growth of 31.7%.
Headquartered in Nashville, TN, HCA Healthcare, Inc. (HCA - Free Report) is the prime provider of services related to healthcare. The company posted an average positive earnings surprise of 2.2% for the last four quarters. For 2018, we are expecting the firm to post year-over-year earnings growth of 32.2%.
Based in Sunrise, FL, MEDNAX, Inc. (MD - Free Report) is primarily involved in providing specialty clinical services to babies born with complex problems. We are expecting the company to post earnings growth of 26.4% and 6.1% for 2018 and 2019, respectively.
Cimpress N.V. (CMPR - Free Report) , based in Venlo, the Netherlands, is an online supplier of high-quality graphic design services and customized printed products to small businesses and consumers. The company surpassed the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 65.2%.
FTI Consulting, Inc. (FCN - Free Report) , headquartered in Washington, District of Columbia, is the leading business advisory player. The company posted an average positive earnings surprise of 6.1% for the prior four quarters. For 2018 and 2019, the earnings growth rate for the company is 2.6% and 16.2%, respectively.
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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Forget Market Volatility With These 5 Low-Beta Stocks
The most common strategy is to invest in risky stocks with the hope of lucrative returns. The strategy works well only when the market is bullish, but investors should prepare mentally for the opposite scenario.
We have created a strategy which clearly shows that handsome returns could also be earned from stocks that are less volatile than the market.
Meaning of Beta
Beta measures the volatility or risks to a security relative to the market (we are considering the S&P 500 here). That is, beta measures the extent to which the price of a stock moves with respect to the market.
If the beta is equal to 1 it means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1.
For example, if the beta is 1.8 then the stock will witness 80% more movement than the market. Hence, we can say that if the market goes up, the stock will outperform by 80%. Conversely, if the market plunges, the stock will lose much more value than the market.
Building a Low-Risk Portfolio
In order to find stocks with lower-than-market volatility, we added beta between 0 and 0.6 as our main criterion for screening. However, we need to keep in mind that low beta is not the only metric to be considered for choosing stocks in a volatile market. Hence to reach the winning strategy, we have considered a few additional criteria.
Percentage Change in Price in the last 4 Weeks: We considered those stocks that saw positive price movement over the last month.
Average 20 Day Volume greater than or equal to 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 eight stocks that fit the bill:
Headquartered in Denton, TX,Sally Beauty Holdings, Inc. (SBH - Free Report) is the leading provider of professional beauty products. The company managed to surpass the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 2.7%. For fiscal 2018, the company will likely report year-over-year earnings growth of 31.7%.
Headquartered in Nashville, TN, HCA Healthcare, Inc. (HCA - Free Report) is the prime provider of services related to healthcare. The company posted an average positive earnings surprise of 2.2% for the last four quarters. For 2018, we are expecting the firm to post year-over-year earnings growth of 32.2%.
Based in Sunrise, FL, MEDNAX, Inc. (MD - Free Report) is primarily involved in providing specialty clinical services to babies born with complex problems. We are expecting the company to post earnings growth of 26.4% and 6.1% for 2018 and 2019, respectively.
Cimpress N.V. (CMPR - Free Report) , based in Venlo, the Netherlands, is an online supplier of high-quality graphic design services and customized printed products to small businesses and consumers. The company surpassed the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 65.2%.
FTI Consulting, Inc. (FCN - Free Report) , headquartered in Washington, District of Columbia, is the leading business advisory player. The company posted an average positive earnings surprise of 6.1% for the prior four quarters. For 2018 and 2019, the earnings growth rate for the company is 2.6% and 16.2%, respectively.
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 »