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4 Low-Beta Stocks to Buy on Hotter-Than-Expected Inflation
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Inflation has started its climb once again this year, raising concerns over the Federal Reserve’s plans for rate cuts. The Labor Department said on Apr 10 that the Consumer Price Index (CPI) accelerated 0.4% month over month in March, higher than economists’ expectations of a rise of 0.3%. CPI rose by the same margin in February.
Year-over-year CPI rose 3.5% in March, higher than the consensus estimate of a rise of 3.4%, and the highest since September. This follows a 3.2% jump in February.
The jump in March can be attributed to a sharp rise in gasoline and shelter costs. Gasoline prices jumped 1.7%, while shelter costs, which includes rents, climbed 0.4%.
Inflation has declined sharply from its peak of 9.1% in June 2022 but remains stubbornly high after three straight months of increase, which has once again raised concerns that the Federal Reserve might further delay its rate cuts.
The Federal Reserve last month said that it still plans three rate cuts by the end of this year but didn’t give a timeline for the first rate cut. Also, the Fed said that inflation remains sharply higher than its 2% target and is in no rush to cut interest rates.
On Wednesday, stocks took a hit, with all three major indexes ending in the red following the release of the fresh inflation data. The Dow, the S&P 500 and the Nasdaq declined 1.1%, 1% and 0.9%, respectively. Fears of a delayed rate cut could keep markets volatile for a longer period.
Our Choices
Given this situation, it would be wise to invest in defensive stocks like utilities and consumer staples. Also, these stocks belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atmos Energy Corporation (ATO - Free Report) , along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.66 and a current dividend yield of 2.7%.
American Water Works Company, Inc. (AWK - Free Report) provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 6.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 60 days. AWK presently carries a Zacks Rank #2. American Water Works has a beta of 0.63 and a current dividend yield of 2.32%.
Global Water Resources, Inc. (GWRS - Free Report) is a water resource management company. GWRS owns and operates regulated water, wastewater and recycled water utilities.
Global Water Resources has an expected earnings growth rate of 19.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 60 days. GWRS presently carries a Zacks Rank #2. Global Water Resources has a beta of 0.97 and a current dividend yield of 2.40%.
Lancaster Colony (LANC - Free Report) is a manufacturer and marketer of specialty food products for the retail and foodservice markets. LANC’s wholly-owned subsidiaries, including T. Marzetti Company, produce and market high-quality national and regionally-branded food products throughout the United States for the retail and foodservice markets.
Lancaster Colony has an expected earnings growth rate of 34% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.4% over the past 60 days. LANC presently carries a Zacks Rank #2. Lancaster Colony has a beta of 0.35 and a current dividend yield of 1.78%.
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4 Low-Beta Stocks to Buy on Hotter-Than-Expected Inflation
Inflation has started its climb once again this year, raising concerns over the Federal Reserve’s plans for rate cuts. The Labor Department said on Apr 10 that the Consumer Price Index (CPI) accelerated 0.4% month over month in March, higher than economists’ expectations of a rise of 0.3%. CPI rose by the same margin in February.
Year-over-year CPI rose 3.5% in March, higher than the consensus estimate of a rise of 3.4%, and the highest since September. This follows a 3.2% jump in February.
The jump in March can be attributed to a sharp rise in gasoline and shelter costs. Gasoline prices jumped 1.7%, while shelter costs, which includes rents, climbed 0.4%.
Inflation has declined sharply from its peak of 9.1% in June 2022 but remains stubbornly high after three straight months of increase, which has once again raised concerns that the Federal Reserve might further delay its rate cuts.
The Federal Reserve last month said that it still plans three rate cuts by the end of this year but didn’t give a timeline for the first rate cut. Also, the Fed said that inflation remains sharply higher than its 2% target and is in no rush to cut interest rates.
On Wednesday, stocks took a hit, with all three major indexes ending in the red following the release of the fresh inflation data. The Dow, the S&P 500 and the Nasdaq declined 1.1%, 1% and 0.9%, respectively. Fears of a delayed rate cut could keep markets volatile for a longer period.
Our Choices
Given this situation, it would be wise to invest in defensive stocks like utilities and consumer staples. Also, these stocks belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atmos Energy Corporation (ATO - Free Report) , along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.66 and a current dividend yield of 2.7%.
American Water Works Company, Inc. (AWK - Free Report) provides essential water services to over 14 million customers in 24 states and has an employee strength of 6,500. AWK also acquires small water service providers to expand its customer base.
American Water Works Company has an expected earnings growth rate of 6.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1% over the last 60 days. AWK presently carries a Zacks Rank #2. American Water Works has a beta of 0.63 and a current dividend yield of 2.32%.
Global Water Resources, Inc. (GWRS - Free Report) is a water resource management company. GWRS owns and operates regulated water, wastewater and recycled water utilities.
Global Water Resources has an expected earnings growth rate of 19.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 60 days. GWRS presently carries a Zacks Rank #2. Global Water Resources has a beta of 0.97 and a current dividend yield of 2.40%.
Lancaster Colony (LANC - Free Report) is a manufacturer and marketer of specialty food products for the retail and foodservice markets. LANC’s wholly-owned subsidiaries, including T. Marzetti Company, produce and market high-quality national and regionally-branded food products throughout the United States for the retail and foodservice markets.
Lancaster Colony has an expected earnings growth rate of 34% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.4% over the past 60 days. LANC presently carries a Zacks Rank #2. Lancaster Colony has a beta of 0.35 and a current dividend yield of 1.78%.