Back to top

Buy 5 Low-Beta Stocks to Sail Through Market Volatility

Read MoreHide Full Article

Everyone knows that risky stocks give lucrative returns. The strategy is foolproof when the market is bullish. However, below-market returns are inevitable when the market walks on the bearish path. Our strategy of investing in low risky stocks paved the way for investors so that they can get rid of the market volatility.

Meaning of Beta

Beta indicates the volatility of a particular stock with respect to the market. In other words, beta measures the extent of stock price movement relative to the market (we are considering S&P 500 here).

If a company has a beta of 1, it means that the relative volatility of the stock is the same as that of the S&P 500. In the same way, if the stock’s beta is greater than 1 then it is more volatile compared to the market. Conversely, a beta below 1 signifies less volatility.

Now, if a portfolio’s beta is 3, it is three times more volatile than the market. Hence, if the market is projected to give 20% return, the portfolio will then definitely contribute 60% return which is amazing.

However, the opposite case also holds true. If the market slips 20% then the portfolio return plummets 60% which is surely a matter of concern.

The Winning Strategy

In our screening criteria we included beta in the range of 0 to 0.6 for short listing low risk stocks. But this can’t be the only criterion for betting on stocks. The other parameters that need to be added to create a winning portfolio are:

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 12 stocks that qualified the screening:

Based in Ann Arbor, MI, Domino's Pizza, Inc. (DPZ - Free Report) delivers pizza all over the word. The company managed to beat the Zacks Consensus Estimate in each of the prior four quarters with an average positive earnings surprise of 6.11%. Also, we are expecting the firm to witness year-over-year earnings growth of 33.9% and 36.8% in 2017 and 2018, respectively. 

Magellan Health, Inc. (MGLN - Free Report) , based in Scottsdale, AZ, is primarily involved in operations related to the management of healthcare. The firm surpassed the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 0.86%. Magellan will likely report earnings growth of 24.1% and 7% for 2017 and 2018, respectively.

Headquartered in Charlotte, NC, Premier, Inc. (PINC - Free Report) has a strong focus on transforming the healthcare services. For fiscal 2018 and 2019, we are projecting the company to post earnings growth of 12.4% and 11.4%, respectively. Over the prior 30 days, the fiscal 2018 Zacks Consensus Estimate for earnings has been revised upward.

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 4.9% for fiscal 2018.

IntriCon Corporation (IIN - Free Report) , headquartered in Arden Hills, MN, is the leading developer of miniature body-worn devices. The company posted an average positive earnings surprise of 59.5% for the last four quarters. For 2017 and 2018, the firm will likely witness earnings growth of 157.1% and 150%, respectively.

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 »



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 »

More from Zacks Analyst Blog

You May Like