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In the context of Wall Street, beta is a gauge of a stock’s movement or volatility compared to the general market – typically the S&P 500 Index. Beta measures the magnitude to which a stock fluctuates versus the fluctuations of the major market indices.
How does it work?
A beta of 1.0 means that a stock hypothetically has the same magnitude of movement as the overall market. A beta higher than 1.0 means the stock is more volatile than the market. For example, a beta of 1.20 would suggest that the underlying equity moves about 20% more than the S&P 500 Index. Examples of high beta stocks include Credo Tech (CRDO - Free Report) and GameStop Corp (GME - Free Report) – which regularly see moves of 10% or more in each direction.
Image Source: Zacks Investment Research
Generally, low beta stocks can be optimal for investors because they provide less wild swings, and ultimately less risk – all else being equal. On the contrary, some degree of beta is needed within a portfolio to achieve higher returns. Remember, no risk, no returns. Another example of a high beta stock would be Tesla (TSLA - Free Report) . Tesla has a beta of 1.74, meaning it tends to move 74% more than the market.
Image Source: Zacks Investment Research
As an investor, it is best to find the mix that works for you best. There is no “one size fits all” solution, and often the best portfolios have a mix between both high and low beta stocks. Through this counterbalance, investors can benefit by outperforming on up days, but also surviving downswings in the major indices.
3 Low Beta Stocks to Consider
1. Zacks #1 Rank (Strong Buy) stock Hershey (HSY - Free Report) has much going for it. North America’s largest chocolate maker is not only trading steady; the stock is nearing new highs amidst a volatile market. Over the past year, Hershey is higher by 21.10% versus -5% returns in the S&P 500 Index.
Image Source: Zacks Investment Research
Hershey has more attributes than strong price performance and a low beta. HSY pays a juicy 1.72% dividend, has strong earnings expectations moving forward, and has smashed earnings estimates for eleven straight quarters.
Image Source: Zacks Investment Research
2. Yum China (YUMC - Free Report) holds a Zacks Rank of 2 (Buy). The company owns and franchises restaurants in China, such as KFC, Pizza Hut, and Taco Bell. Yum China is the definition of a steady performer. Despite strict lockdowns and a volatile Chinese equity market, the stock has been a serial steady outperformer. For example, yesterday, when many Chinese stocks got crushed, YUMC was flat.
Image Source: Zacks Investment Research
Investors should continue to ride the stock as long as it stays above its 50-day moving average.
3. Zacks Rank # 3 Box Inc (BOX - Free Report) is a cloud-based software platform operator. Box grew EPS at a 41% clip last quarter and while most software stocks are in the gutter, BOX is approaching new all-time highs and is showing relative strength. Unlike the previous two stocks we mentioned above, Box offers investors in search of low beta a high-growth tech option.
Image Source: Zacks Investment Research
Box is set to report earnings on March 3rd, and investors should expect a big break out should earnings beat expectations.
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Low Beta, High Performance: 3 Stocks to Watch
Beta: A Volatility Measuring Tool
In the context of Wall Street, beta is a gauge of a stock’s movement or volatility compared to the general market – typically the S&P 500 Index. Beta measures the magnitude to which a stock fluctuates versus the fluctuations of the major market indices.
How does it work?
A beta of 1.0 means that a stock hypothetically has the same magnitude of movement as the overall market. A beta higher than 1.0 means the stock is more volatile than the market. For example, a beta of 1.20 would suggest that the underlying equity moves about 20% more than the S&P 500 Index. Examples of high beta stocks include Credo Tech (CRDO - Free Report) and GameStop Corp (GME - Free Report) – which regularly see moves of 10% or more in each direction.
Image Source: Zacks Investment Research
Generally, low beta stocks can be optimal for investors because they provide less wild swings, and ultimately less risk – all else being equal. On the contrary, some degree of beta is needed within a portfolio to achieve higher returns. Remember, no risk, no returns. Another example of a high beta stock would be Tesla (TSLA - Free Report) . Tesla has a beta of 1.74, meaning it tends to move 74% more than the market.
Image Source: Zacks Investment Research
As an investor, it is best to find the mix that works for you best. There is no “one size fits all” solution, and often the best portfolios have a mix between both high and low beta stocks. Through this counterbalance, investors can benefit by outperforming on up days, but also surviving downswings in the major indices.
3 Low Beta Stocks to Consider
1. Zacks #1 Rank (Strong Buy) stock Hershey (HSY - Free Report) has much going for it. North America’s largest chocolate maker is not only trading steady; the stock is nearing new highs amidst a volatile market. Over the past year, Hershey is higher by 21.10% versus -5% returns in the S&P 500 Index.
Image Source: Zacks Investment Research
Hershey has more attributes than strong price performance and a low beta. HSY pays a juicy 1.72% dividend, has strong earnings expectations moving forward, and has smashed earnings estimates for eleven straight quarters.
Image Source: Zacks Investment Research
2. Yum China (YUMC - Free Report) holds a Zacks Rank of 2 (Buy). The company owns and franchises restaurants in China, such as KFC, Pizza Hut, and Taco Bell. Yum China is the definition of a steady performer. Despite strict lockdowns and a volatile Chinese equity market, the stock has been a serial steady outperformer. For example, yesterday, when many Chinese stocks got crushed, YUMC was flat.
Image Source: Zacks Investment Research
Investors should continue to ride the stock as long as it stays above its 50-day moving average.
3. Zacks Rank # 3 Box Inc (BOX - Free Report) is a cloud-based software platform operator. Box grew EPS at a 41% clip last quarter and while most software stocks are in the gutter, BOX is approaching new all-time highs and is showing relative strength. Unlike the previous two stocks we mentioned above, Box offers investors in search of low beta a high-growth tech option.
Image Source: Zacks Investment Research
Box is set to report earnings on March 3rd, and investors should expect a big break out should earnings beat expectations.