Back to top

Image: Bigstock

Combat Market Volatility With These 4 Low-Beta Stocks

Read MoreHide Full Article

High inflation is weighing on the mood of the people of the United States. This is reflected in the country’s lowest level of consumer sentiment in a decade in November. Thus, despite the fact that economies are gradually coming out of the coronavirus pandemic, the market remains volatile.

Hence, creating a portfolio of low-beta stocks is of utmost importance since the securities will deliver healthy returns and provide a shield against choppy market conditions.

Meaning of Beta

Beta measures the volatility or risk of a particular asset compared 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.

Screening Criteria:

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 four stocks that qualified the screening:

Headquartered in Anoka, MN, Vista Outdoor Inc. (VSTO - Free Report) is a leading manufacturer of consumer products that target recreation and sports markets. The Zacks Consensus Estimate for Vista Outdoor’s earnings per share for fiscal 2022 and 2023 has been revised upward over the past seven days. The Zacks Consensus Estimate for the top line for fiscal 2022 is pegged at $2.9 billion, suggesting a rise of 32.2% year over year.

Vista Outdoor’s stock has surged 88.5% so far this year, comparing favorably with a decline of 34.6% of the composite stocks belonging to the industry. VSTO has a strong focus on returning capital to shareholders. Since the inception of the $100-million share buyback plan, 1,523,683 shares have been bought back by VSTO for a total consideration of $56 million.

AMN Healthcare Services, Inc. (AMN - Free Report) is a leading provider of staffing services to hospitals and healthcare facilities. The Zacks Consensus Estimate for AMN Healthcare’s earnings per share for 2021 is pegged at $7.32, suggesting a massive year-over-year improvement of 113.4%.

With the most diverse staffing and workforce technology solutions, AMN Healthcare is well placed to generate huge cashflows for years since the United States has been trying to cope with a severe shortage of healthcare professionals in history.

Standard Motor Products, Inc. (SMP - Free Report) is primarily involved in the manufacturing of replacement parts for motor vehicles. The Zacks Consensus Estimate for earnings per share for this year has witnessed upward revisions in the past 30 days.

Banking on record results and growing businesses, Standard Motor has been returning capital to shareholders. So far this year, SMP bought back $26.5 million shares of common stock. There has also been an authorization from the board of directors so that the leading automotive parts manufacturer will repurchase an additional $30 million common stock.

Albertsons Companies, Inc. (ACI - Free Report) is a well-known food and drug retailer. For fiscal 2021, the Zacks Consensus Estimate for Albertsons’ earnings per share has witnessed upward revisions over the past 30 days.

Based on strong results for the second quarter, Albertsons rewarded investors with a quarterly dividend hike of 20%. The outlook for fiscal 2021 has also been raised by ACI.

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.

The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.

Click here to sign up for a free trial to the Research Wizard today.

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: