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Scared of Market Volatility? Bet on 5 Low-Beta Stocks
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Generally, the investment community believes that only risky securities could generate lucrative returns. The strategy seems meaningful when the market is bullish. But investors should also be ready to accept lackluster returns when the market turns bearish.
With intense research, we have developed a strategy which clearly shows that less risky assets can also provide investors with impressive returns only when some parameters are considered.
Meaning 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 between 0 and 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 a 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 or equal to 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.
Here are five of the 15 stocks that fit the bill:
Based in London, Michael Kors Holdings Limited is a global luxury lifestyle company, founded by designer Michael Kors. The company managed to surpass the Zacks Consensus Estimate in each of the prior four quarters, with an average positive earnings surprise of 23.70%. Also, we are expecting the firm to witness year-over-year revenue growth of 3% for fiscal year 2018.
Headquartered in Springdale, AR, Tyson Foods, Inc. (TSN - Free Report) is the biggest U.S. chicken company and produces, distributes and markets chicken, beef, pork as well as prepared foods. The company is expected to post year-over-year earnings growth of 8.1% for fiscal year 2018. Moreover, Tyson Foods delivered an average positive earnings surprise of 6% for the last four quarters.
Sprouts Farmers Market, Inc. (SFM - Free Report) , based in Phoenix, AZ, is the supplier of organic food in the United States. The company beat the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 16.3%. On top of that, Sprouts Farmers will likely see year-over-year earnings growth of 17.5% for 2017.
Headquartered in San Juan, Puerto Rico, Triple-S Management Corporation is a leading managed care firm. The company delivered an average positive earnings surprise of 73.98% for the prior four quarters. Also, we are expecting the firm to report year-over-year earnings growth of 846.2% for 2017.
Rayonier Inc. (RYN - Free Report) , headquartered in Jacksonville, FL, is a real estate investment trust having properties at productive U.S. timber growing areas. The company surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 96%.
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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Scared of Market Volatility? Bet on 5 Low-Beta Stocks
Generally, the investment community believes that only risky securities could generate lucrative returns. The strategy seems meaningful when the market is bullish. But investors should also be ready to accept lackluster returns when the market turns bearish.
With intense research, we have developed a strategy which clearly shows that less risky assets can also provide investors with impressive returns only when some parameters are considered.
Meaning 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 between 0 and 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 a 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 or equal to 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.
Here are five of the 15 stocks that fit the bill:
Based in London, Michael Kors Holdings Limited is a global luxury lifestyle company, founded by designer Michael Kors. The company managed to surpass the Zacks Consensus Estimate in each of the prior four quarters, with an average positive earnings surprise of 23.70%. Also, we are expecting the firm to witness year-over-year revenue growth of 3% for fiscal year 2018.
Headquartered in Springdale, AR, Tyson Foods, Inc. (TSN - Free Report) is the biggest U.S. chicken company and produces, distributes and markets chicken, beef, pork as well as prepared foods. The company is expected to post year-over-year earnings growth of 8.1% for fiscal year 2018. Moreover, Tyson Foods delivered an average positive earnings surprise of 6% for the last four quarters.
Sprouts Farmers Market, Inc. (SFM - Free Report) , based in Phoenix, AZ, is the supplier of organic food in the United States. The company beat the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 16.3%. On top of that, Sprouts Farmers will likely see year-over-year earnings growth of 17.5% for 2017.
Headquartered in San Juan, Puerto Rico, Triple-S Management Corporation is a leading managed care firm. The company delivered an average positive earnings surprise of 73.98% for the prior four quarters. Also, we are expecting the firm to report year-over-year earnings growth of 846.2% for 2017.
Rayonier Inc. (RYN - Free Report) , headquartered in Jacksonville, FL, is a real estate investment trust having properties at productive U.S. timber growing areas. The company surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 96%.
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 »