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Buy 5 Low-Beta Stocks for Immunity to Market Volatility
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Smart and successful investors never follow crowd, instead, they focus on extensive research for creating a proper investment strategy. Following the crowd blindly and investing in risky stocks will fetch handsome returns only when the market is bullish.
In this article we have presented a strategy which clearly shows that less-risky securities could also reward investors with impressive returns.
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 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 22 stocks that qualified the screening:
Based in Nelsonville, OH, Rocky Brands, Inc. (RCKY - Free Report) is primarily engaged in designing and marketing finest footwear. The company surpassed the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 264.6%. We are expecting the company to witness year-over-year earnings growth of 29.3% for 2018.
The Boston Beer Company, Inc. (SAM - Free Report) , based in Boston, MA, is the leading brewer of varieties of beer. The company beat the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 41.8%. The firm will likely report earnings growth of 19.1% for 2018.
Headquartered in Chicago, IL, Conagra Brands, Inc. (CAG - Free Report) is primarily a food firm that persistently upgrades its portfolio with the variation of preferences for food of customers around the globe. The company delivered an average positive earnings surprise of 6.7% for the past four quarters. Also, for the current year, we are expecting the company to post year-over-year earnings growth of 17.2%.
DMC Global Inc. (BOOM - Free Report) , headquartered in Boulder, CO, is engaged in manufacturing clad metal plates. The company delivered an average positive earnings surprise of 69% for the prior four quarters. For 2018, the firm will likely witness earnings growth of 687.5%.
Headquartered in Chicago, IL, United States Cellular Corporation (USM - Free Report) is a leading provider of services related to wireless telecommunication. The company beat the Zacks Consensus Estimate in three of the past four quarters, the average positive earnings surprise being 306.5%. For 2018, the company will likely witness earnings growth of 41.4%.
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 for Immunity to Market Volatility
Smart and successful investors never follow crowd, instead, they focus on extensive research for creating a proper investment strategy. Following the crowd blindly and investing in risky stocks will fetch handsome returns only when the market is bullish.
In this article we have presented a strategy which clearly shows that less-risky securities could also reward investors with impressive returns.
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 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 22 stocks that qualified the screening:
Based in Nelsonville, OH, Rocky Brands, Inc. (RCKY - Free Report) is primarily engaged in designing and marketing finest footwear. The company surpassed the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 264.6%. We are expecting the company to witness year-over-year earnings growth of 29.3% for 2018.
The Boston Beer Company, Inc. (SAM - Free Report) , based in Boston, MA, is the leading brewer of varieties of beer. The company beat the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 41.8%. The firm will likely report earnings growth of 19.1% for 2018.
Headquartered in Chicago, IL, Conagra Brands, Inc. (CAG - Free Report) is primarily a food firm that persistently upgrades its portfolio with the variation of preferences for food of customers around the globe. The company delivered an average positive earnings surprise of 6.7% for the past four quarters. Also, for the current year, we are expecting the company to post year-over-year earnings growth of 17.2%.
DMC Global Inc. (BOOM - Free Report) , headquartered in Boulder, CO, is engaged in manufacturing clad metal plates. The company delivered an average positive earnings surprise of 69% for the prior four quarters. For 2018, the firm will likely witness earnings growth of 687.5%.
Headquartered in Chicago, IL, United States Cellular Corporation (USM - Free Report) is a leading provider of services related to wireless telecommunication. The company beat the Zacks Consensus Estimate in three of the past four quarters, the average positive earnings surprise being 306.5%. For 2018, the company will likely witness earnings growth of 41.4%.
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 »