Back to top

Analyst Blog

The economy is dependent on various micro and macro factors, which can push the volatility button hard when they come into play. Notably, September saw a burning event like the debate between Donald Trump and Hillary Clinton for the U.S. Presidential election 2016, which along with the sudden surge in oil prices and uncertainty looming over the Fed’s rate hike decision caused various ups and downs in the market. The impact is most likely to slip into October, thus making it an unpredictable month.

Delving deeper into these factors, let’s start with the face-off between the two candidates for the White House that occurred last week, as it seems to be the talking point now. In fact, the first debate itself was signal enough for investors to judge the state of the economy under either’s presidency, as the debate was quite a heated one – including discussions about various sectors, alongside some sensitive topics.

Well, elections always lead to stock market volatility and it won’t be any different this time around.  So, standing in the last month before the elections, investors must gear up for an extremely volatile October.

Further, the Organization of the Petroleum Exporting Countries’ recent decision of curtailing the oil output caused a rebound in oil prices that had a mixed effect on the global economy. While the energy sector received it as good news, the surge in oil price was a threat to Consumer Goods and Airline spaces. This in turn, contributed significantly to the market commotion.

If these factors were not enough to keep investors on their toes as they embrace October, it should be kept in mind that this month will also mark the onset of the third-quarter earnings season, thus adding to the market speculations. So when the stock market barely needs a spark to catch the fire of volatility, wonder what so many factors can do to it.

Safeguard Your Portfolio

To prevent themselves from a capricious October, investors must play safe by going for low-beta stocks. Beta measures the volatility or risk of a particular asset in comparison to the market. In other words, beta measures the extent of a security’s price movement relative to the market. So, investors should go with low-beta stocks, which are inherently less volatile than the markets they trade in. In this case, a low beta ranges from 0 to 1.

We have selected five low beta stocks (beta less than 0.75) that boast a Zacks Rank #1 (Strong Buy) or #2 (Buy). The search was also narrowed down with a Value score of ‘A’ or ‘B.’

Value stocks offer an opportunity to buy a stock that is currently undervalued by the market. We think investing in these stocks could actually be a safer bet, given their inclination for steady growth and momentum in price. Moreover, these stocks have low P/Es, pay decent dividends, hold a solid outlook, usually yield high returns and produce exponential gains over time.

Let’s Get Going

All said, we zeroed in on the following five picks, using our Zacks Style Score system.

Starting with the Pennsylvania-based American Eagle Outfitters, Inc. (AEO - Analyst Report) , this Zacks Rank #1 stock has a beta of 0.72. Also, the company has witnessed an uptrend in estimates for fiscal 2016, over the last 60 days. Adding further to its inherent strength story, the company has posted positive earnings surprises for seven straight quarters now, and currently possesses a Value score of ‘A’. So, we believe there’s nothing that can keep you away from this leading specialty retailer of fashionable apparel and accessories, with a long-term EPS growth rate of 11.8%.

Investors can also count on broad-line closeout retailer – Big Lots Inc. (BIG - Analyst Report) with a beta as low as 0.66 and long-term growth rate of 13.4%. The company not only flaunts an impressive earnings surprise history in the past 10 straight quarters, but its positive estimate revisions for fiscal 2016 over the past two months also instill confidence among investors. This Ohio-based company can be a perfect fit for investors’ portfolio, armed with a value score of ‘A’ and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

To satiate investors’ appetite further, we suggest investing in The Cheesecake Factory Inc. (CAKE - Analyst Report) with a long-term growth rate of 14.2%. Headquartered in California, this Zacks Rank #2 company operates upscale, casual, and full-service dining restaurants. The company’s solid earnings surprise history and favorable estimate revisions for 2016 over the past 90 days, highlight its solid prospects. Not enough? Take a look at its value score of ‘A’ and beta of 0.45, and you will be sure of tasting this delicious cheesecake.

Another stock you must not miss out on is Waste Management, Inc. (WM - Analyst Report) . This provider of comprehensive waste management services in North America carries a Zacks Rank #2 and a value score of ‘B’. The stock has not been a disappointment, as is evident from its average trailing four-quarter earnings surprise of 4.2%, with a beat in each quarter. Further, the stock’s beta of 0.58 is likely to keep it protected from the market tussles. Waste Management also showcases upward revisions in its estimates for 2016, over the past 90 days – making it a solid bet.

Finally, one can take a look at leading communications equipment manufacturer, Motorola Solutions, Inc. (MSI - Analyst Report) . This Zacks Rank #2 company has seen its estimates rise for 2016, over the past couple of months, and also flaunts a value score of ‘B’. Additionally, this Illinois-based company has a beta of 0.45 that makes it a safe bet. The company’s past performance further adds a cherry on the cake as it has topped bottom-line estimates consistently over the past four quarters.

So, it’s time you book your profits, by placing your money in these safe havens.

Confidential: Zacks' Best Investment Ideas 

Would you like to see a hand-picked "all-star" selection of investment ideas from the man who heads up Zacks' trading and investing services? Steve Reitmeister knows when key trades are about to be triggered and which of our experts has the hottest hand. Click for his selected trades right now >>

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 »