On Aug 19, major benchmarks including the S&P 500, the Dow and the Nasdaq finished lower after the minutes of the Fed’s July 28-29 meeting showed that policymakers voiced their concerns regarding the continuing impact of the coronavirus pandemic on the fragile economy.

 

Federal Open Market Committee members said that the coronavirus is likely to persistently hamper growth and pose threat to the financial system. Officials at the meeting “agreed that the ongoing public health crisis would weigh heavily on economic activity, employment, and inflation in the near term and was posing considerable risks to the economic outlook over the medium term,” the meeting summary said. 

 

Policymakers further cautioned that the swift rebound in jobs data seen in May and June slowed and that “substantial improvement” in the labor market is solely dependent on a “broad and sustained” reopening of business activity.

 

However, a return to growth in the third quarter seems tough as fresh spike in coronavirus cases is casting a shadow on the pace of recovery. Lest we forget, the US economic growth already took a beating in the second quarter with GDP tumbling at a seasonally adjusted rate of 32.9%.

 

Along with concerns about general economic growth, the policymakers also remained apprehensive about the health of the financial system. With the virus spread refusing to cease, the financial system is undoubtedly at risk. What’s more, burgeoning levels of public debt already exists. The federal government is now at a $26.6 trillion debt. Public debt increased amid the pandemic as the Congress borrowed large sums of money to aid those impacted by the coronavirus-led shutdown measures.

 

Fed, thus, highlighted the need to support vulnerable families and the broader economy with additional stimulus measures. Fed Chair Jerome Powell and other policymakers emphasized the need for more fiscal help from the Congress. 

 

The Fed, by the way, has already undertaken actions to support the economy. The Fed kept its rates unchanged last month, citing the economy was still in need for monetary support. The Fed kept its benchmark short-term interest rate within a range of 0% to 0.25%. It trimmed rates in mid-March as the pandemic impacted the economy severely.

With the markets gyrating on Fed’s cautious view, investors should build a strategy on low-risk assets and a combination of parameters that lead to better returns. The best way to go about doing this is by creating a portfolio of low-beta stocks, which are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1.

 

These stocks are also dividend payers, which boast immense financial strength and are immune to market vagaries. At the same time, these stocks are defensive plays. Such stocks are generally non-cyclical or companies whose performance and sales are not highly correlated with activities in the broader market. Their products are in constant demand irrespective of market volatility and such names include companies from utility, healthcare and consumer staples sectors.

We have, thus, selected five such stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).

 

Chesapeake Utilities Corporation (CPK Quick QuoteCPK - Free Report) is a diversified energy company. The company has a Zacks Rank #2 and a beta of 0.27. It has a dividend yield of 2.1%. The Zacks Consensus Estimate for its current year earnings increased 1.7% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 11.5% and 10.5%, respectively.

 

UGI Corporation (UGI Quick QuoteUGI - Free Report) distributes, stores, transports, and markets energy products and related services in the United States. The company has a Zacks Rank #2 and a beta of 0.93. It has a dividend yield of 3.8%. The Zacks Consensus Estimate for its current year earnings improved 12.9% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 11.4% and 13%, respectively.

 

Humana Inc. (HUM Quick QuoteHUM - Free Report) operates as a health and well-being company in the United States. The company has a Zacks Rank #2 and a beta of 0.86. It has a dividend yield of 0.6%. The Zacks Consensus Estimate for its current year earnings increased 0.4% over the past 60 days. The company’s expected earnings growth rate for the current and next year is 5.4% and 16.4%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.

 

Flowers Foods, Inc. (FLO Quick QuoteFLO - Free Report) produces and markets packaged bakery products in the United States. The company has a Zacks Rank #1 and a beta of 0.36. It has a dividend yield of 3.2%. The Zacks Consensus Estimate for its current year earnings increased 11.9% over the past 60 days. The company’s expected earnings growth rate for the current year is 27.1%.

 

B&G Foods, Inc. (BGS Quick QuoteBGS - Free Report) manufactures, sells, and distributes a portfolio of shelf-stable and frozen foods, and household products in the United States. The company has a Zacks Rank #2 and a beta of 0.31. It has a dividend yield of 6.3%. The Zacks Consensus Estimate for its current year earnings increased 3.3% over the past 60 days. The company’s expected earnings growth rate for the current year is 35.4%.

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