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Endure Market Volatility with These 5 Low Beta Stocks
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The notion that risky securities bring on attractive returns holds true in bull markets. In a bear market, investors will witness exactly the opposite as their portfolio returns are less than the market. In this article, we develop an idea that investors can use to reap solid returns from less risky stocks if they take into account some other investing parameters.
Understanding of Beta
Beta measures the volatility or risks to a security relative to the market (we are considering the S&P 500 here). That is, beta measures the extent to which the price of a stock moves with respect to the market.
If the beta is equal to 1 it means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1.
For example, if the beta is 1.8 then the stock will witness 80% more movement than the market. Hence, we can say that if the market goes up, the stock will outperform by 80%. Conversely, if the market plunges, the stock will lose much more value than the market.
Building a Low-Risk Portfolio
In order to find stocks with lower-than-market volatility, we added beta in the range of 0 to 0.6 as our main criterion for screening. However, we need to keep in mind that low beta is not the only metric to be considered for choosing stocks in the volatile market. Hence to reach the winning strategy, we have considered a few additional criteria.
Percentage Change in Price in the last 4 Weeks: We considered those stocks that 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.
Here are five of the 12 stocks that qualified the screening:
Sanderson Farms Inc. is involved in businesses like producing, processing, marketing and distributing fresh and frozen chicken products in the U.S. For the last four quarters, the company delivered an average positive earnings surprise of 25.01%. Moreover, over the last 60 days, the Zacks Consensus Estimate for fiscal 2016 saw an increase of more than 7%.
The Children's Place Inc. (PLCE - Free Report) is the leading seller of apparel, footwear and accessories for children. In other words, the company operates as specialty apparel retailer for the children. Most importantly, the company surpassed the Zacks Consensus Estimate is each of the prior four quarters, with an average beat of 33.06%. Moreover, the year-over-year earnings growth for fiscal 2016 is projected at 30.4%.
Heska Corporation is involved in developing and marketing of companion animal health products globally. Heska beat the Zacks Consensus Estimate is each of the prior four quarters, with an average positive surprise of 320.87%. Additionally, for 2016, the company is expected to witness 53.04% earnings growth year over year.
Carbonite, Inc. is the primary supplier of cloud and hybrid business continuity solutions mainly to individuals in the U.S. The company managed to surpass the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 80.08%. Moreover, for 2016, the company’s year-over-year earnings growth is projected at over 166%.
HomeStreet Inc. (HMST - Free Report) is the supplier of a wide range of financial services mainly in California, Pacific Northwest and Hawaii. Over the last four quarters, the company’s average beat was 17.28%. Moreover, for 2016, the company’s year-over-year earnings growth is projected at almost 18%.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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Endure Market Volatility with These 5 Low Beta Stocks
The notion that risky securities bring on attractive returns holds true in bull markets. In a bear market, investors will witness exactly the opposite as their portfolio returns are less than the market. In this article, we develop an idea that investors can use to reap solid returns from less risky stocks if they take into account some other investing parameters.
Understanding of Beta
Beta measures the volatility or risks to a security relative to the market (we are considering the S&P 500 here). That is, beta measures the extent to which the price of a stock moves with respect to the market.
If the beta is equal to 1 it means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1.
For example, if the beta is 1.8 then the stock will witness 80% more movement than the market. Hence, we can say that if the market goes up, the stock will outperform by 80%. Conversely, if the market plunges, the stock will lose much more value than the market.
Building a Low-Risk Portfolio
In order to find stocks with lower-than-market volatility, we added beta in the range of 0 to 0.6 as our main criterion for screening. However, we need to keep in mind that low beta is not the only metric to be considered for choosing stocks in the volatile market. Hence to reach the winning strategy, we have considered a few additional criteria.
Percentage Change in Price in the last 4 Weeks: We considered those stocks that 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 (Strong Buy) stocks here.
Here are five of the 12 stocks that qualified the screening:
Sanderson Farms Inc. is involved in businesses like producing, processing, marketing and distributing fresh and frozen chicken products in the U.S. For the last four quarters, the company delivered an average positive earnings surprise of 25.01%. Moreover, over the last 60 days, the Zacks Consensus Estimate for fiscal 2016 saw an increase of more than 7%.
The Children's Place Inc. (PLCE - Free Report) is the leading seller of apparel, footwear and accessories for children. In other words, the company operates as specialty apparel retailer for the children. Most importantly, the company surpassed the Zacks Consensus Estimate is each of the prior four quarters, with an average beat of 33.06%. Moreover, the year-over-year earnings growth for fiscal 2016 is projected at 30.4%.
Heska Corporation is involved in developing and marketing of companion animal health products globally. Heska beat the Zacks Consensus Estimate is each of the prior four quarters, with an average positive surprise of 320.87%. Additionally, for 2016, the company is expected to witness 53.04% earnings growth year over year.
Carbonite, Inc. is the primary supplier of cloud and hybrid business continuity solutions mainly to individuals in the U.S. The company managed to surpass the Zacks Consensus Estimate in three of the last four quarters, with an average beat of 80.08%. Moreover, for 2016, the company’s year-over-year earnings growth is projected at over 166%.
HomeStreet Inc. (HMST - Free Report) is the supplier of a wide range of financial services mainly in California, Pacific Northwest and Hawaii. Over the last four quarters, the company’s average beat was 17.28%. Moreover, for 2016, the company’s year-over-year earnings growth is projected at almost 18%.
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/.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »