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Market Volatility is Not a Concern: Buy 5 Low-Beta Stocks
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In the investment field we cannot scoop up handsome returns if we shy away from risky stocks. The strategy is true to some extent, especially when the market is bullish. But, we should also be ready to accept huge loss if the market turns bearish.
We have developed an investment strategy which clearly shows that lucrative returns can also be generated from less risky stocks. This may sound surprising but it is true.
Meaning of Beta
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. In this article, we are considering the S&P 500 as the market.
If a stock has beta of 1 then the price of the stock will move with the market. So, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.
For example, if the market offers a return of 20%, a stock with beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20% the stock will sink 60%, which is devastating.
The Winning Strategy
We have taken beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. But this should not be the only factor to be considered while selecting a winning strategy. We need to take into account other parameters that can add value to the portfolio.
Percentage Change in Price in the Last 4 Weeks greater than zero: This ensures that the stocks saw positive price movement over the last one 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.
Here are five of the seven stocks that qualified the screening:
Based in New York, G-III Apparel Group, Ltd. (GIII - Free Report) is a leading designer of apparel for men and women. The company managed to surpass the Zacks Consensus Estimate for earnings in three of the last four quarters. We are also expecting the company to witness year-over-year earnings growth of 2.1% for fiscal 2018.
Michael Kors Holdings Limited , based in London, the United Kingdom, is also a leading distributor of apparel for men and women. The company beat the Zacks Consensus Estimate for earnings in all the prior four quarters. Also, the fiscal 2018 Zacks Consensus Estimate for earnings has been revised upward over the last 60 days.
Based in Scottsdale, AZ, Magellan Health, Inc. is the leading healthcare management player. The company beat the Zacks Consensus Estimate for earnings in three of the prior four quarters. On top of that, for 2017, we are projecting the stock to report year-over-year earnings growth of almost 24%.
The Boston Beer Company, Inc. (SAM - Free Report) , based in Boston, MA, is the largest craft brewer in the United States. The firm has managed to surpass the Zacks Consensus Estimate for earnings in all the prior four quarters, with an average positive surprise of 63.4%.
On top of that, over the last 60 days, the Zacks Consensus Estimate for earnings in 2017 has been revised upward.
Headquartered in Washington, FTI Consulting, Inc. (FCN - Free Report) is the leading provider of specialized consulting services. The Zacks Consensus Estimate for 2017 earnings has been revised upward over the last 60 days.
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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Market Volatility is Not a Concern: Buy 5 Low-Beta Stocks
In the investment field we cannot scoop up handsome returns if we shy away from risky stocks. The strategy is true to some extent, especially when the market is bullish. But, we should also be ready to accept huge loss if the market turns bearish.
We have developed an investment strategy which clearly shows that lucrative returns can also be generated from less risky stocks. This may sound surprising but it is true.
Meaning of Beta
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. In this article, we are considering the S&P 500 as the market.
If a stock has beta of 1 then the price of the stock will move with the market. So, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.
For example, if the market offers a return of 20%, a stock with beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20% the stock will sink 60%, which is devastating.
The Winning Strategy
We have taken beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. But this should not be the only factor to be considered while selecting a winning strategy. We need to take into account other parameters that can add value to the portfolio.
Percentage Change in Price in the Last 4 Weeks greater than zero: This ensures that the stocks saw positive price movement over the last one 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.
Here are five of the seven stocks that qualified the screening:
Based in New York, G-III Apparel Group, Ltd. (GIII - Free Report) is a leading designer of apparel for men and women. The company managed to surpass the Zacks Consensus Estimate for earnings in three of the last four quarters. We are also expecting the company to witness year-over-year earnings growth of 2.1% for fiscal 2018.
Michael Kors Holdings Limited , based in London, the United Kingdom, is also a leading distributor of apparel for men and women. The company beat the Zacks Consensus Estimate for earnings in all the prior four quarters. Also, the fiscal 2018 Zacks Consensus Estimate for earnings has been revised upward over the last 60 days.
Based in Scottsdale, AZ, Magellan Health, Inc. is the leading healthcare management player. The company beat the Zacks Consensus Estimate for earnings in three of the prior four quarters. On top of that, for 2017, we are projecting the stock to report year-over-year earnings growth of almost 24%.
The Boston Beer Company, Inc. (SAM - Free Report) , based in Boston, MA, is the largest craft brewer in the United States. The firm has managed to surpass the Zacks Consensus Estimate for earnings in all the prior four quarters, with an average positive surprise of 63.4%.
On top of that, over the last 60 days, the Zacks Consensus Estimate for earnings in 2017 has been revised upward.
Headquartered in Washington, FTI Consulting, Inc. (FCN - Free Report) is the leading provider of specialized consulting services. The Zacks Consensus Estimate for 2017 earnings has been revised upward over the last 60 days.
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 »