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Shrug Off Market Volatility With These 5 Low Beta Stocks
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Following the crowd mindlessly, especially when it comes to investing, is not advisable. The common perception is that only risky stocks generate high returns. However, this strategy works well only when the market is bullish.
We have developed a plan that clearly shows that less risky stocks also have the potential to reward shareholders with impressive returns only when certain parameters are taken into account.
Meaning of Beta
Beta measures the volatility or risk of a particular asset in comparison to the market. In other words, beta measures the extent of a security’s price movement relative to the market. In this article, we are considering the S&P 500 as the market.
If a stock has beta of 1 then the price of the stock will move with the market. So, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.
For example, if the market offers a return of 20%, a stock with beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20% the stock will sink 60%, which is devastating.
Screening Criteria:
We have taken beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. But this should not be the only factor to be considered while selecting a winning strategy. We need to take into account other parameters that can add value to the portfolio.
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 17 stocks that qualified the screening:
Headquartered in Baltimore, MD, Medifast, Inc. (MED - Free Report) is primarily involved in manufacturing and distributing products like oatmeal to support healthy living. The company surpassed the Zacks Consensus Estimate in each of the prior three quarters, the average positive earnings surprise being 16.8%. We also expect the stock to report earnings growth of 59.4% for 2018.
Myriad Genetics, Inc. (MYGN - Free Report) , headquartered in Salt Lake City, UT, through its advanced molecular diagnostics has transformed lives of patients all over the world. The personalized medicine firm surpassed the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 20.8%. For fiscal 2018, we expect the company to record earnings growth of 13.3%.
Headquartered in San Clemente, CA, ICU Medical, Inc. (ICUI - Free Report) is the leading manufacturer and seller of pioneering medical devices. The company beat the Zacks Consensus Estimate in the last four quarters. For 2018, the company will likely report earnings growth of 9.5%.
Ellie Mae, Inc. , headquartered in Pleasanton, CA, primarily supports the mortgage finance industry by providing cloud-based platform. The company beat the Zacks Consensus Estimate in three of the last four quarters. We expect the company to see earnings growth of 8.5% and 38.1% for 2018 and 2019, respectively.
Based in King of Prussia, PA, UGI Corporation (UGI - Free Report) is primarily involved in the distribution of energy products. For fiscal 2018 and 2019, we expect the firm to post earnings growth of 17.9% and 5.9%, 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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Shrug Off Market Volatility With These 5 Low Beta Stocks
Following the crowd mindlessly, especially when it comes to investing, is not advisable. The common perception is that only risky stocks generate high returns. However, this strategy works well only when the market is bullish.
We have developed a plan that clearly shows that less risky stocks also have the potential to reward shareholders with impressive returns only when certain parameters are taken into account.
Meaning of Beta
Beta measures the volatility or risk of a particular asset in comparison to the market. In other words, beta measures the extent of a security’s price movement relative to the market. In this article, we are considering the S&P 500 as the market.
If a stock has beta of 1 then the price of the stock will move with the market. So, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.
For example, if the market offers a return of 20%, a stock with beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20% the stock will sink 60%, which is devastating.
Screening Criteria:
We have taken beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. But this should not be the only factor to be considered while selecting a winning strategy. We need to take into account other parameters that can add value to the portfolio.
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 17 stocks that qualified the screening:
Headquartered in Baltimore, MD, Medifast, Inc. (MED - Free Report) is primarily involved in manufacturing and distributing products like oatmeal to support healthy living. The company surpassed the Zacks Consensus Estimate in each of the prior three quarters, the average positive earnings surprise being 16.8%. We also expect the stock to report earnings growth of 59.4% for 2018.
Myriad Genetics, Inc. (MYGN - Free Report) , headquartered in Salt Lake City, UT, through its advanced molecular diagnostics has transformed lives of patients all over the world. The personalized medicine firm surpassed the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 20.8%. For fiscal 2018, we expect the company to record earnings growth of 13.3%.
Headquartered in San Clemente, CA, ICU Medical, Inc. (ICUI - Free Report) is the leading manufacturer and seller of pioneering medical devices. The company beat the Zacks Consensus Estimate in the last four quarters. For 2018, the company will likely report earnings growth of 9.5%.
Ellie Mae, Inc. , headquartered in Pleasanton, CA, primarily supports the mortgage finance industry by providing cloud-based platform. The company beat the Zacks Consensus Estimate in three of the last four quarters. We expect the company to see earnings growth of 8.5% and 38.1% for 2018 and 2019, respectively.
Based in King of Prussia, PA, UGI Corporation (UGI - Free Report) is primarily involved in the distribution of energy products. For fiscal 2018 and 2019, we expect the firm to post earnings growth of 17.9% and 5.9%, 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 »