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Top 5 Low-Beta Stocks to Stay Safe From Near-Term Volatility

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July is turning out to be the best month for Wall Street so far in 2022. U.S. stock markets have been suffering from severe volatility since the beginning of this year after witnessing an astonishing rally in the last-two coronavirus-ridden years.

Year to date, all the major stock indexes have suffered to a great extent. On a positive note, situations have changed in July. However, volatility may reappear in the last week of this month, which market participants have termed as the most vital week of this summer.

Consequently, it should be fruitful to invest in low-beta (beta <1) stocks to safe guard your portfolio. Five such stocks with a favorable Zacks Rank are - LPL Financial Holdings Inc. (LPLA - Free Report) , Dollar Tree Inc. (DLTR - Free Report) , Lamb Weston Holdings Inc. (LW - Free Report) , M&T Bank Corp. (MTB - Free Report) and Corteva Inc. (CTVA - Free Report) .

Most Vital Week of This Summer

The Fed is headed toward its next FOMC scheduled Jul 26-27. Five technology behemoths along with 892 companies are slated to report earnings results this week. Moreover, crucial economic data like the first estimate of second-quarter GDP, PCE and core PCE inflation for June and consumer confidence to name a few will be released this week.

Market participants are currently divided in their prediction of whether the U.S. GDP growth rate will be negative for the second quarter or not. Notably, the U.S. economy contracted 1.6% in the first quarter. A negative growth rate for consecutive quarters is generally recognized as a sign of recession.

Similarly, economists and financial experts are debating whether the Fed will raise the benchmark interest rate by another 75 in July after June or become more aggressive and hike the interest rate by 1% to combat mounting inflation at any cost.

Moreover, the most crucial data of the core PCE price index – Fed’s favorite inflation gauge – of June will be released this week along with consumer spending and personal income. Several housing sector data and consumer confidence for July are also slated to release this week. Therefore, U.S. stock markets may remain volatile in the near term.

Our Top Picks

We have narrowed our search to five large-cap (market capital > $10 billion) low-beta stocks. These companies have strong potential for the rest of 2022 and have seen positive earnings estimate revisions in the last 60 days. Each of our picks carries a Zacks Rank #1 (Strong 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 in the past three months.

Zacks Investment Research
Image Source: Zacks Investment Research

LPL Financial has been benefiting from strategic acquisitions, including the buyout of Waddell & Reed's wealth management business. Solid advisor productivity and recruiting efforts are expected to keep aiding advisory revenues of LPLA. Moreover, LPL Financial's efficient capital deployment activities reflect a solid balance sheet position.

LPLA has an expected earnings growth rate of 42.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.6% over the last 7 days. LPL Financial has a beta of 0.95.

Dollar Tree is a customer-oriented, value-driven variety store operating at a one-dollar price point. DLTR operates through two segments, Dollar Tree and Family Dollar. Following the robust first-quarter fiscal 2022 performance, DLTR raised its guidance for fiscal 2022 and provided a decent second-quarter view.

Dollar Tree benefited from the completion of the $1.25 multi-price point initiative at the Dollar Tree stores, as well as robust margins, despite the increase in freight costs and SG&A expenses.

Dollar Tree has an expected earnings growth rate of 40.5% for the current year (ending January 2023). The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. DLTR has a beta of 0.68.

M&T Bank provide banking services that offers deposits, business loans and leases, and credit cards and cash management, payroll and letters of credit services to small businesses and professionals. Organic growth, driven by higher fee income, loans and deposits, will likely increase MTB’s revenues.

M&T Bank is growing inorganically backed by a sound liquidity position. The acquisition of People's United Financial is expected to be accretive to its earnings. Capital deployment activities seem sustainable, given its favorable debt/equity ratio.

M&T Bank has an expected earnings growth rate of 10.3% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.8% over the last 7 days. MTB has a beta of 0.89.

Lamb Weston has been benefiting from the recovery in Foodservice business. The trend was witnessed in third-quarter fiscal 2022, wherein Foodservice sales soared 34% to $294.5 million. Volumes benefited from the continued rebound in demand at full-service restaurants and non-commercial channels, like lodging and hospitality.

Further, LW’s top line is benefiting from robust price/mix. During the third quarter, price/mix increased 12%, mainly reflecting gains from pricing actions in the company’s business segments undertaken to counter input, manufacturing and transportation cost inflation. Apart from this, Lamb Weston’s efforts to boost offerings and expand capacity enable the company to effectively meet rising demand conditions for snacks and fries.

LW has an expected earnings growth rate of 47% for the current year (ending May 2023). The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 30 days. Lamb Weston has a beta of 0.50.

Corteva operates in the agriculture business. CTVA operates through two segments, Seed and Crop Protection. Corteva develops and supplies germplasm and traits in corn, soybean and sunflower seed markets. CTVA also supplies products to the agricultural input industry that protects against weeds, insects and other pests, and diseases as well as enhances crop health.

Corteva has an expected earnings growth rate of 18.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the last 60 days. CTVA has a beta of 0.73.