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These 3 Low-Beta Stocks Are Great Shields Against Volatility
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For those looking to shield themselves from volatility, a great way to build up a portfolio’s overall defense is to target stocks that carry a low beta.
And, it goes without saying that an extra layer of portfolio defense is something that all investors could benefit from in 2022.
But what even is beta, and what is considered “low”?
Beta is a measure of a stock's systematic risk, or volatility, compared to the market as a whole. Generally, the benchmark is the S&P 500, which has a beta of 1.0.
A beta higher than 1.0 is considered more volatile than the general market, and the opposite is also true – stocks with a beta of less than 1.0 are considered “low-beta” and are less sensitive to the market’s movements.
Three stocks that carry a beta of less than 1.0 include The Kroger Co. (KR - Free Report) , The Coca-Cola Company (KO - Free Report) , and Johnson & Johnson (JNJ - Free Report) . Below is a year-to-date chart of all three stocks with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Right off the bat, we can see the difference in the performance.
Let’s take a deeper dive into each one.
The Kroger Co.
Founded in 1883, the long-time retailer operates approximately 2,700 retail stores under its various banners and divisions in 35 states.
The company carries a beta of 0.47.
Undoubtedly a major positive, analysts have upped their earnings outlook across the board over the last 60 days, helping push the stock into a favorable Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
In addition, the company has a favorable growth profile – earnings are forecasted to climb 9% in FY23 and an additional 4% in FY24.
Kroger’s top line growth looks to continue also, with revenue projected to climb 7.3% in FY23 and a further 2% in FY24.
Image Source: Zacks Investment Research
To put the cherry on top, KR shares trade at enticing valuation levels, as displayed by its Style Score of an A for Value.
The company’s 12.8X forward earnings multiple is just a tick above its 12.6X five-year median but represents a staggering 51% discount relative to its Zacks Retail & Wholesale Sector.
Image Source: Zacks Investment Research
The Coca-Cola Company
Coca-Cola’s product portfolio includes more than 4,700 beverage products with more than 500 brands, spanning from sodas, sparkling beverages, and energy drinks.
KO carries a beta of 0.54.
The beverage titan has a strong earnings track record, exceeding both revenue and earnings estimates in each of its last six quarterly reports. Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
Further, Coca-Cola is forecasted to register notable growth – earnings are forecasted to climb 6% in FY22 and a further 5% in FY23.
KO’s revenue growth trajectory also looks to continue, with KO’s top-line forecasted to climb 10% in FY22 and 3% in FY23.
Image Source: Zacks Investment Research
Coca-Cola’s commitment to rewarding its shareholders is commendable – KO has upped its dividend payout for 60 consecutive years, meeting the strict requirements to join the elite Dividend King group.
The company’s annual dividend yields a notable 2.8%, nicely above its Zacks Consumer Staples Sector average of 2.6%.
Image Source: Zacks Investment Research
Johnson & Johnson
Headquartered in New Jersey, Johnson & Johnson is an American multinational corporation that develops medical devices, pharmaceuticals, and consumer packaged goods.
JNJ carries a beta of 0.61.
Like KO, Johnson & Johnson has been heavily dedicated to rewarding its shareholders – the company is also part of the elite Dividend King group, upping its dividend payout for a mind-boggling 60 consecutive years.
JNJ’s annual dividend yields 2.7%, with a sustainable payout ratio sitting at 45% of earnings. Further, the annual yield is much higher than its Zacks Medical Sector average of 1.4%.
Image Source: Zacks Investment Research
JNJ’s valuation levels are also sound; the company’s 16.5X forward earnings multiple is just a hair below its five-year median of 16.9X and represents an enticing 25% discount relative to its Zacks Sector.
Image Source: Zacks Investment Research
In addition, the long-time medical supplier is still witnessing notable growth, with earnings forecasted to climb 2.5% in FY22 and 4.5% in FY23.
Revenue growth is also worth highlighting, with JNJ’s top line projected to climb 1.4% in FY22 and 4% in FY23.
Image Source: Zacks Investment Research
Bottom Line
Investors could heavily benefit from an increased level of defense in their portfolios amid the challenging macroeconomic backdrop we’ve found ourselves in.
When looking for stocks that provide a higher level of security, targeting low-beta stocks is a widely deployed strategy by many investors.
When classifying the value, a beta of less than 1.0 indicates that the stock is less sensitive to the market’s movements.
All three stocks above, The Kroger Co. (KR - Free Report) , The Coca-Cola Company (KO - Free Report) , and Johnson & Johnson (JNJ - Free Report) , carry a beta of less than 1.0, providing investors with the volatility shield needed.
In addition, all three companies are more than well-established with a successful history, instilling further confidence.
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These 3 Low-Beta Stocks Are Great Shields Against Volatility
For those looking to shield themselves from volatility, a great way to build up a portfolio’s overall defense is to target stocks that carry a low beta.
And, it goes without saying that an extra layer of portfolio defense is something that all investors could benefit from in 2022.
But what even is beta, and what is considered “low”?
Beta is a measure of a stock's systematic risk, or volatility, compared to the market as a whole. Generally, the benchmark is the S&P 500, which has a beta of 1.0.
A beta higher than 1.0 is considered more volatile than the general market, and the opposite is also true – stocks with a beta of less than 1.0 are considered “low-beta” and are less sensitive to the market’s movements.
Three stocks that carry a beta of less than 1.0 include The Kroger Co. (KR - Free Report) , The Coca-Cola Company (KO - Free Report) , and Johnson & Johnson (JNJ - Free Report) . Below is a year-to-date chart of all three stocks with the S&P 500 blended in as a benchmark.
Image Source: Zacks Investment Research
Right off the bat, we can see the difference in the performance.
Let’s take a deeper dive into each one.
The Kroger Co.
Founded in 1883, the long-time retailer operates approximately 2,700 retail stores under its various banners and divisions in 35 states.
The company carries a beta of 0.47.
Undoubtedly a major positive, analysts have upped their earnings outlook across the board over the last 60 days, helping push the stock into a favorable Zacks Rank #2 (Buy).
Image Source: Zacks Investment Research
In addition, the company has a favorable growth profile – earnings are forecasted to climb 9% in FY23 and an additional 4% in FY24.
Kroger’s top line growth looks to continue also, with revenue projected to climb 7.3% in FY23 and a further 2% in FY24.
Image Source: Zacks Investment Research
To put the cherry on top, KR shares trade at enticing valuation levels, as displayed by its Style Score of an A for Value.
The company’s 12.8X forward earnings multiple is just a tick above its 12.6X five-year median but represents a staggering 51% discount relative to its Zacks Retail & Wholesale Sector.
Image Source: Zacks Investment Research
The Coca-Cola Company
Coca-Cola’s product portfolio includes more than 4,700 beverage products with more than 500 brands, spanning from sodas, sparkling beverages, and energy drinks.
KO carries a beta of 0.54.
The beverage titan has a strong earnings track record, exceeding both revenue and earnings estimates in each of its last six quarterly reports. Below is a chart illustrating the company’s revenue on a quarterly basis.
Image Source: Zacks Investment Research
Further, Coca-Cola is forecasted to register notable growth – earnings are forecasted to climb 6% in FY22 and a further 5% in FY23.
KO’s revenue growth trajectory also looks to continue, with KO’s top-line forecasted to climb 10% in FY22 and 3% in FY23.
Image Source: Zacks Investment Research
Coca-Cola’s commitment to rewarding its shareholders is commendable – KO has upped its dividend payout for 60 consecutive years, meeting the strict requirements to join the elite Dividend King group.
The company’s annual dividend yields a notable 2.8%, nicely above its Zacks Consumer Staples Sector average of 2.6%.
Image Source: Zacks Investment Research
Johnson & Johnson
Headquartered in New Jersey, Johnson & Johnson is an American multinational corporation that develops medical devices, pharmaceuticals, and consumer packaged goods.
JNJ carries a beta of 0.61.
Like KO, Johnson & Johnson has been heavily dedicated to rewarding its shareholders – the company is also part of the elite Dividend King group, upping its dividend payout for a mind-boggling 60 consecutive years.
JNJ’s annual dividend yields 2.7%, with a sustainable payout ratio sitting at 45% of earnings. Further, the annual yield is much higher than its Zacks Medical Sector average of 1.4%.
Image Source: Zacks Investment Research
JNJ’s valuation levels are also sound; the company’s 16.5X forward earnings multiple is just a hair below its five-year median of 16.9X and represents an enticing 25% discount relative to its Zacks Sector.
Image Source: Zacks Investment Research
In addition, the long-time medical supplier is still witnessing notable growth, with earnings forecasted to climb 2.5% in FY22 and 4.5% in FY23.
Revenue growth is also worth highlighting, with JNJ’s top line projected to climb 1.4% in FY22 and 4% in FY23.
Image Source: Zacks Investment Research
Bottom Line
Investors could heavily benefit from an increased level of defense in their portfolios amid the challenging macroeconomic backdrop we’ve found ourselves in.
When looking for stocks that provide a higher level of security, targeting low-beta stocks is a widely deployed strategy by many investors.
When classifying the value, a beta of less than 1.0 indicates that the stock is less sensitive to the market’s movements.
All three stocks above, The Kroger Co. (KR - Free Report) , The Coca-Cola Company (KO - Free Report) , and Johnson & Johnson (JNJ - Free Report) , carry a beta of less than 1.0, providing investors with the volatility shield needed.
In addition, all three companies are more than well-established with a successful history, instilling further confidence.