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Brush Off Volatility Concerns With These 5 Low-Beta Stocks
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Though most investors believe that only risky stocks generate lucrative returns, it is not a rule of thumb. It should be noted that risky securities fetch handsome returns only when the market is bullish.
We have created a strategy that shows that less-risky stocks can also generate impressive returns only when certain other parameters are considered.
Understanding 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 past 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 16 stocks that qualified the screening:
Based in New York, G-III Apparel Group, Ltd. (GIII - Free Report) is the leading provider of apparel and associated products. The company beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 190.8%. For fiscal 2019 and 2020, we expect the firm to record earnings growth of 46.9% and 12.8%, respectively.
Urban Outfitters, Inc. (URBN - Free Report) , based in Philadelphia, PA, is the seller of consumer products like footwear, fashion apparel for both men and women. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 19.8%. Urban Outfitters will likely see earnings growth of 49.1% and 8.8% in fiscal 2019 and 2020, respectively.
Based in Redwood City, CA, Genomic Health, Inc. , through genomic testing, helps patients to get optimized care for cancer treatment. The company posted an average positive earnings surprise of 226.4%. We expect the firm to post earnings growth of 4,600% and 60.8% in 2018 and 2019, respectively.
Amedisys, Inc. (AMED - Free Report) , headquartered in Baton Rouge, LA, is the principal provider of services like rehabilitation after surgery and personal health care to patients at their home. The firm beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 10.6%.
Headquartered in Chicago, IL, Motorola Solutions (MSI - Free Report) is a leading communications equipment manufacturer. The company beat the Zacks Consensus Estimate in all the prior four quarters. We expect the firm to post earnings growth of 24.5% and 8.8% in 2018 and 2019, 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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Brush Off Volatility Concerns With These 5 Low-Beta Stocks
Though most investors believe that only risky stocks generate lucrative returns, it is not a rule of thumb. It should be noted that risky securities fetch handsome returns only when the market is bullish.
We have created a strategy that shows that less-risky stocks can also generate impressive returns only when certain other parameters are considered.
Understanding 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 past 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 16 stocks that qualified the screening:
Based in New York, G-III Apparel Group, Ltd. (GIII - Free Report) is the leading provider of apparel and associated products. The company beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 190.8%. For fiscal 2019 and 2020, we expect the firm to record earnings growth of 46.9% and 12.8%, respectively.
Urban Outfitters, Inc. (URBN - Free Report) , based in Philadelphia, PA, is the seller of consumer products like footwear, fashion apparel for both men and women. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 19.8%. Urban Outfitters will likely see earnings growth of 49.1% and 8.8% in fiscal 2019 and 2020, respectively.
Based in Redwood City, CA, Genomic Health, Inc. , through genomic testing, helps patients to get optimized care for cancer treatment. The company posted an average positive earnings surprise of 226.4%. We expect the firm to post earnings growth of 4,600% and 60.8% in 2018 and 2019, respectively.
Amedisys, Inc. (AMED - Free Report) , headquartered in Baton Rouge, LA, is the principal provider of services like rehabilitation after surgery and personal health care to patients at their home. The firm beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 10.6%.
Headquartered in Chicago, IL, Motorola Solutions (MSI - Free Report) is a leading communications equipment manufacturer. The company beat the Zacks Consensus Estimate in all the prior four quarters. We expect the firm to post earnings growth of 24.5% and 8.8% in 2018 and 2019, 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 »