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Protect Your Portfolio From Volatility With 5 Low-Beta Picks

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Wall Street has been grappling with volatility since the beginning of this week. Although the overall movement of the market has continued to be northbound so far this year after an impressive rally in pandemic-ridden 2020, volatility was rife in the first two months of 2021 resulting in market fluctuations.

January's volatility was the result of a typical trading practice in which a few key heavily shorted stocks by hedge fund giants were favored by a group of individual investors organized via Reddit’s wallstreetbets forum. However, in February, volatility resulted from lingering problems in the U.S. labor market, spike in benchmark Treasury Note yield and inflationary expectations.

At this juncture, it will be prudent to invest in low-beta (beta value less than 1 but greater than zero) stocks with a favorable Zacks Rank as these will be less volatile than the broader market.

Labor Market  Continues to Struggle

The labor market, which was the best-performing segment of the U.S. economy before the outbreak of coronavirus, suffered the most during the pandemic. Although most of the segments of the economy are showing signs of recovery albeit at a slow pace, the labor market is still in jeopardy.

On Feb 18, the Department of Labor reported that weekly jobless claims for the week ended Feb 13 rose 13,000 to 861,000, the highest level in a month, and above the consensus estimate of 766,000. Previous week's data was also revised upward to 848,000 from 793,000 reported earlier. Before the outbreak of the pandemic, weekly jobless claims were hovering around 200,000.

Moreover, another 516,299 applicants filed for initial claims last week through a temporary federal-relief program. Combining these two claims, the government received nearly 1.38 million jobless benefit applications last week. Notably, combined claims have stayed above 1 million since May 2020.

Inflation Expectations

Inflation expectations are currently at the highest level since 2014 as market participants are discounting  the effects of ongoing nationwide deployment of COVID-19 vaccines and President Joe Biden's proposed $1.9 trillion fresh coronavirus-aid package.

Vaccination will result in reopening of the U.S. economy that has been operating at a sub-optimal level since the outbreak of the virus in March 2020. Moreover, the fresh fiscal stimulus will help realize pent-up demand of  American consumers, thereby boosting the GDP. Notably, retail sales climbed 5.3% in January against a drop of 1% in December, buoyed by Congressional approval of $900 billion stimulus at the end of 2020.

Higher inflation may compel the Fed to readjust its current benchmark interest rate at 0-0.25%, which the central bank otherwise had thought of maintaining up to 2023.

Spike in Treasury Note Yields

The two positives mentioned above have driven Wall Street's northbound journey so far this year after an astonishing rally defying coronavirus-led devastations. The situation prompted investors to shift the allotment of  funds from safe-haven government bonds to risky equities.

Consequently, the yield on the benchmark 10-year US Treasury Note is around 1.3% for the first time since February 2020 and the yield on 30-year US Treasury Note is hovering near 2%, its highest level in a year.

A section of economists and financial experts, especially those who believe that the stock market is currently overvalued, have warned that further rise in government bond yields may trigger the exit button from risky equities to bonds.

Our Top Picks

We have narrowed down our search to five  low-beta stocks that have strong growth potential for 2021 and have witnessed solid earnings estimate revisions in the past 30 days. Moreover, these companies are regular dividend payers providing important income stream during market's downturn. Each of our picks carry either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

 

Sanderson Farms Inc. (SAFM - Free Report) is an integrated poultry processing company that produces, processes, markets, and distributes fresh, frozen, and prepared chicken products in the United States. The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved 36.3% over the past 30 days. This Zacks Rank #1 stock has a beta of 0.60 and a dividend yield of 1.17%.

Abbott Laboratories (ABT - Free Report) discovers, develops, manufactures and sells a diversified line of health care products worldwide. The company has an expected earnings growth rate of 38.9% for the current year. The Zacks Consensus Estimate for the current year has improved 15.8% over the past 30 days. This Zacks Rank #2 stock has a beta of 0.73 and a dividend yield of 1.41%.

Caterpillar Inc. (CAT - Free Report) manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives worldwide. The company has an expected earnings growth rate of 21.3% for the current year. The Zacks Consensus Estimate for the current year has improved 4.9% over the past 30 days. This Zacks Rank #2 stock has a beta of 0.95 and a dividend yield of 2.04%.

CNA Financial Corp. (CNA - Free Report) provides commercial property and casualty insurance products primarily in the United States. It operates through Specialty, Commercial, International, Life & Group, and Corporate & Other segments.

The company has an expected earnings growth rate of 55.6% for the current year. The Zacks Consensus Estimate for the current year has improved 1.2% over the past seven days. This Zacks Rank #2 stock has a beta of 0.84 and a dividend yield of 3.38%.

Acushnet Holdings Corp. (GOLF - Free Report) designs, develops, manufactures and distributes golf products in the United States, Europe, the Middle East, Africa, Japan, Korea, and worldwide. It operates through four segments: Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear and FootJoy Golf Wear.

The company has an expected earnings growth rate of 58.1% for the current year. The Zacks Consensus Estimate for the current year has improved 0.6% over the past 30 days. This Zacks Rank #2 stock has a beta of 0.83 and a dividend yield of 1.37%.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>