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The Magic Elixir: Low Beta + Strong Outperformance (2 Stocks to Buy)

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What is the Advantage of Low Beta & Outperformance?

A low-beta stock with strong out performance is ideal for investors seeking a balance between stability and high returns. Beta measures a stock’s sensitivity to market fluctuations, and a low beta indicates lower volatility than the major indices like the S&P 500 Index ETF ((SPY - Free Report) ). When combined with strong outperformance, it suggests that the stock has delivered robust returns while exhibiting a relatively stable price movement. This combination is attractive to investors looking for a less risky investment that still offers compelling returns, providing a level of protection during market downturns while capturing the benefits of the stock’s superior performance. It aligns with a conservative investment strategy prioritizing both capital preservation and growth potential.

Deckers Outdoor: A Best-in-Class Retailer

Founded in 1973 and headquartered in California, Zacks Rank #1 (Strong Buy) stock Deckers Outdoor Corporation ((DECK - Free Report) ) is a leading designer, producer, and brand manager of innovative, niche footwear and accessories developed for outdoor sports and other lifestyle-related activities. DECK’s products are sold through specialty domestic retailers, international distributors, and directly to end-users through its websites and catalogs. The UGG brand makes up nearly 70% of revenues and has proven to be a highly resilient line of premium footwear. However, the HOKA brand is gaining momentum and accounts for a growing slice of total revenues.

Consistent Growth

Despite the bear market of 2022, inflation concerns, and consumer credit concerns, DECK has delivered consistently growing earnings and sales. The company has been growing for at least a decade, showing that its core products are sticky and resilient with consumers.

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Frozen Rope Uptrend + Low Beta

DECK is working on its sixth monthly gain in a row, though it should be mentioned that the stock is still in a massive long-term. Investors should not try to predict when a trend will end but instead understand the trend is their friend. In addition, DECK’s beta of 1.01 means it’s about as volatile as the S&P, except shares are up 116% over the past year, while the S&P 500 is only up 27.8%!

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International Business Machines: An Underrated, Underappreciated AI Leader

Zacks Rank #2 (Buy) stock IBM ((IBM - Free Report) ), or International Business Machines Corporation, is a multinational technology company that operates in various fields, including hardware, software, and services. IBM is renowned for its expertise in computing technology and has a strong focus on artificial intelligence (AI). The company has developed and implemented AI solutions across diverse industries, leveraging advanced technologies such as machine learning, natural language processing, and data analytics. IBM's AI capabilities are exemplified by its Watson platform, which encompasses AI-driven applications for businesses, healthcare, and other sectors, demonstrating its commitment to advancing the frontiers of artificial intelligence.

Watson May Finally Bear Fruit

IBM's Watson is a sophisticated artificial intelligence platform that incorporates machine learning, natural language processing, and data analytics. Watson’s ability to understand, reason, and learn from vast amounts of unstructured data makes it unique. Unlike traditional computer programs, Watson excels at processing and interpreting human language, allowing it to comprehend complex information and provide insightful solutions. Watson's uniqueness lies in its adaptability across diverse industries, offering applications in healthcare, finance, customer service, and more, making it a versatile and powerful tool for organizations seeking innovative AI solutions. IBM has been working on and refining Watson for years, but 2024 will be the year it finally bears fruit for investors. Also, a fun fact is that Watson competed in the popular game show Jeopardy and won both matches by an overwhelming amount – an impressive feat.

A Consistent Overachiever

IBM’s recent EPS surprise history illustrates that Wall Street underestimates the big tech juggernaut. In fact, IBM has delivered positive EPS surprises in 18 of the past 20 quarters.

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“Techno-Fundamentals” Allow You to Gain an Edge

I fancy myself as a techno-fundamentalist – in other words, I combine price action and fundamentals to gain an edge. IBM has both. IBM has a beta of just 0.7, and the daily chart shows a strong uptrend followed by the earnings-induced gap. After earnings on January 5, the stock jumped nearly 10% as volume swelled to 5x the norm. The robust price and volume action screams of institutional accumulation. Furthermore, the fact that price has held tight after the earnings gap makes it a top candidate for the post-earnings drift phenomenon witnessed in many stocks this year.

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See More Zacks Research for These Tickers

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