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Bet on These 3 Low-Beta Stocks to Sail Through a Choppy Market
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Uncertainties are prevailing in the broader market, with investors concerned about the extent of the Federal Reserve's aggressive measures to raise interest rates to combat inflation. This is because excessive tightening of the financial conditions will take a toll on economic growth. These factors are making the market extremely 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 volatile market conditions. In this regard, stocks like Chesapeake Energy Corporation (CHK - Free Report) , Renewable Energy Group, Inc. and Pangaea Logistics Solutions Ltd. (PANL - Free Report) are worth betting on.
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 three stocks that qualified the screening:
Chesapeake Energy Corporation is a leading oil and gas exploration and production player with a footprint in the prolific Marcellus, Haynesville and Eagle Ford shale plays.
In the past seven days, Chesapeake Energy has witnessed upward earnings estimate revisions for 2022 and 2023, respectively. The company has a strong focus on reducing direct greenhouse gases and methane emissions.
Renewable Energy Group, Inc. is a leading producer of renewable fuels like biodiesel. Thus, REGI is playing a vital role in leading the transition of energy and transportation industries to sustainability.
Renewable Energy has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. Year to date, Renewable Energy has gained 44.7%, outperforming the 16.5% increase of the composite stocks belonging to the industry.
Pangaea Logistics Solutions Ltd. generates incremental cashflows by providing logistics services to a broad base of industrial customers. PANL is now banking on dry bulk market fundamentals that are rapidly improving.
Over the past 30 days, Pangaea Logistics Solutions has witnessed upward earnings estimate revisions for 2022 and 2023, respectively. Year to date, Pangaea Logistics Solutions gained 75.4%, outperforming the 26.2% rise of the composite stocks belonging to the industry.
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.
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.
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Bet on These 3 Low-Beta Stocks to Sail Through a Choppy Market
Uncertainties are prevailing in the broader market, with investors concerned about the extent of the Federal Reserve's aggressive measures to raise interest rates to combat inflation. This is because excessive tightening of the financial conditions will take a toll on economic growth. These factors are making the market extremely 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 volatile market conditions. In this regard, stocks like Chesapeake Energy Corporation (CHK - Free Report) , Renewable Energy Group, Inc. and Pangaea Logistics Solutions Ltd. (PANL - Free Report) are worth betting on.
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 three stocks that qualified the screening:
Chesapeake Energy Corporation is a leading oil and gas exploration and production player with a footprint in the prolific Marcellus, Haynesville and Eagle Ford shale plays.
In the past seven days, Chesapeake Energy has witnessed upward earnings estimate revisions for 2022 and 2023, respectively. The company has a strong focus on reducing direct greenhouse gases and methane emissions.
Renewable Energy Group, Inc. is a leading producer of renewable fuels like biodiesel. Thus, REGI is playing a vital role in leading the transition of energy and transportation industries to sustainability.
Renewable Energy has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 30 days. Year to date, Renewable Energy has gained 44.7%, outperforming the 16.5% increase of the composite stocks belonging to the industry.
Pangaea Logistics Solutions Ltd. generates incremental cashflows by providing logistics services to a broad base of industrial customers. PANL is now banking on dry bulk market fundamentals that are rapidly improving.
Over the past 30 days, Pangaea Logistics Solutions has witnessed upward earnings estimate revisions for 2022 and 2023, respectively. Year to date, Pangaea Logistics Solutions gained 75.4%, outperforming the 26.2% rise of the composite stocks belonging to the industry.
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: https://www.zacks.com/performance.