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Tide Over Market Volatility With These 5 Low Beta Stocks
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Investment strategies are formed on thorough research and in-depth understanding of industries. However, the general belief is that only risky stocks turn out to be profitable investments. Notably, risky portfolios only prove rewarding when the market is bullish.
Meanwhile, research shows that even less risky securities can churn out handsome returns if some additional parameters are added.
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 eight stocks that qualified the screening:
Headquartered in Fort Worth, TX, Range Resources Corporation (RRC - Free Report) is among the leading producers of natural gas with focus on the Appalachian Basin. The company beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 74.2%. For 2018 and 2019, the company will likely see earnings growth of 87.9% and 8.1%, respectively.
lululemon athletica inc. (LULU - Free Report) , based in Vancouver, Canada, is the provider of athletic apparel. The company managed to beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 19.2%. The company will likely see earnings growth of 38.2% and 17.8% for fiscal 2018 and 2019, respectively.
North American Construction Group Ltd. (NOA - Free Report) is the provider of services related to mining and heavy construction. In three of the last four quarters, the company surpassed the Zacks Consensus Estimate. The firm will likely see earnings growth of 235.7% and 21.3% in 2018 and 2019, respectively.
Headquartered in Morrisville, NC, ChannelAdvisor Corporation is primarily engaged in offering solutions and services associated to cloud-based e-commerce. The stock surpassed the Zacks Consensus Estimate in each of the prior four quarters. ChannelAdvisor will likely see earnings growth of 187.50% and 146.43% for 2018 and 2019, respectively.
Headquartered in Las Vegas, NV, Southwest Gas Holdings, Inc. (SWX - Free Report) is primarily engaged in distributing natural gas. The company posted an average positive earnings surprise of 24.2%, beating the Zacks Consensus Estimate in three of the last four quarters.
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.
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Tide Over Market Volatility With These 5 Low Beta Stocks
Investment strategies are formed on thorough research and in-depth understanding of industries. However, the general belief is that only risky stocks turn out to be profitable investments. Notably, risky portfolios only prove rewarding when the market is bullish.
Meanwhile, research shows that even less risky securities can churn out handsome returns if some additional parameters are added.
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 eight stocks that qualified the screening:
Headquartered in Fort Worth, TX, Range Resources Corporation (RRC - Free Report) is among the leading producers of natural gas with focus on the Appalachian Basin. The company beat the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 74.2%. For 2018 and 2019, the company will likely see earnings growth of 87.9% and 8.1%, respectively.
lululemon athletica inc. (LULU - Free Report) , based in Vancouver, Canada, is the provider of athletic apparel. The company managed to beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 19.2%. The company will likely see earnings growth of 38.2% and 17.8% for fiscal 2018 and 2019, respectively.
North American Construction Group Ltd. (NOA - Free Report) is the provider of services related to mining and heavy construction. In three of the last four quarters, the company surpassed the Zacks Consensus Estimate. The firm will likely see earnings growth of 235.7% and 21.3% in 2018 and 2019, respectively.
Headquartered in Morrisville, NC, ChannelAdvisor Corporation is primarily engaged in offering solutions and services associated to cloud-based e-commerce. The stock surpassed the Zacks Consensus Estimate in each of the prior four quarters. ChannelAdvisor will likely see earnings growth of 187.50% and 146.43% for 2018 and 2019, respectively.
Headquartered in Las Vegas, NV, Southwest Gas Holdings, Inc. (SWX - Free Report) is primarily engaged in distributing natural gas. The company posted an average positive earnings surprise of 24.2%, beating the Zacks Consensus Estimate in three of the last four quarters.
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.