Investors are weighing the likely U.S. fiscal stimulus and vaccine rollouts on the one hand and rising coronavirus cases on the other, thus making the market extremely volatile.
Hence, creating a portfolio of low-beta stocks is of utmost importance since the securities can not only deliver healthy returns but also provide a shield against choppy market conditions.
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.
We have taken
beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. However, this should not be the only factor to be considered while selecting a winning strategy. We need to take into account other parameters as well 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 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. You can see the complete list of today’s Zacks #1 Rank stocks here .
Here are five of the seven stocks that qualified the screening:
Headquartered in Burlingame, CA,
Innoviva, Inc. ( INVA Quick Quote INVA - Free Report) receives royalties under the Long-Acting Beta2 Agonist (“LABA”) collaboration agreement on sales of once-daily products for treating asthma. The stock is likely to see earnings growth of 54% in 2020. Owens & Minor, Inc. ( OMI Quick Quote OMI - Free Report) , headquartered in Richmond, VA, is a healthcare services player. The stock is likely to see earnings growth of 237.5% and 14.5%, respectively, in 2020 and 2021.
Headquartered in Long Island City, NY,
Standard Motor Products, Inc. ( SMP Quick Quote SMP - Free Report) is a leading distributor of replacement parts for motor vehicles. The stock is likely to see earnings growth of 4% and 11.4% in 2020 and 2021, respectively.
Based in Olathe, KS,
NIC Inc. collaborates with many federal, state and local government agencies and thereby guides governments to serve citizens and businesses with the employment of technology. In 2020, the stock is likely to earnings growth of 36%. In 2020, the stock is likely to earnings growth of 36%. California Water Service Group ( CWT Quick Quote CWT - Free Report) , headquartered in San Jose, CA, is a leading provider of services related to water utility. In 2020, the stock is likely to see earnings growth of 35.1%.
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.
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Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance .