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Brave Market Volatility With These 5 Low-Beta Stocks
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It is a common misconception that only risky investments prove rewarding. The strategy works best when the market is bullish. But we shouldn't forget that investing in these stocks may lead to huge losses during market downturns.
After thorough research, we have created a strategy which clearly shows that a portfolio of less risky stocks can also generate impressive returns when a few parameters are considered.
Beta Understanding
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 13 stocks that qualified the screening:
Based in New York, G-III Apparel Group, Ltd. (GIII - Free Report) is among the leading designers of apparel. The company beat the Zacks Consensus Estimate in the last four quarters, the average positive earnings surprise being 430.2%. The firm is expected to post earnings growth of 63.13% and 12.41% in fiscal 2019 and fiscal 2020, respectively.
HCA Healthcare, Inc. (HCA - Free Report) , headquartered in Nashville, TN, is engaged in providing services related to healthcare. The company beat the Zacks Consensus Estimate in three of the past four quarters. For 2018 and 2019, the company expects earnings growth of 40.1% and 7.6%, respectively.
Headquartered in Boise, ID, US Ecology, Inc. provides environmental services in North America. The company surpassed the Zacks Consensus Estimate in three of the prior four quarters.
Headquartered in Alameda, CA, Penumbra, Inc. (PEN - Free Report) is the designer of medical devices. The company beat the Zacks Consensus Estimate in all the prior four quarters. For 2018 and 2019, the firm will likely post earnings growth of 3,500% and 72.1%, respectively.
North American Construction Group Ltd. (NOA - Free Report) is the provider of services related to mining and heavy construction. In three of the last four quarters, the company surpassed the Zacks Consensus Estimate. The firm will likely post earnings growth of 228.6% and 23.9% in 2018 and 2019, 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.
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.
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Brave Market Volatility With These 5 Low-Beta Stocks
It is a common misconception that only risky investments prove rewarding. The strategy works best when the market is bullish. But we shouldn't forget that investing in these stocks may lead to huge losses during market downturns.
After thorough research, we have created a strategy which clearly shows that a portfolio of less risky stocks can also generate impressive returns when a few parameters are considered.
Beta Understanding
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 13 stocks that qualified the screening:
Based in New York, G-III Apparel Group, Ltd. (GIII - Free Report) is among the leading designers of apparel. The company beat the Zacks Consensus Estimate in the last four quarters, the average positive earnings surprise being 430.2%. The firm is expected to post earnings growth of 63.13% and 12.41% in fiscal 2019 and fiscal 2020, respectively.
HCA Healthcare, Inc. (HCA - Free Report) , headquartered in Nashville, TN, is engaged in providing services related to healthcare. The company beat the Zacks Consensus Estimate in three of the past four quarters. For 2018 and 2019, the company expects earnings growth of 40.1% and 7.6%, respectively.
Headquartered in Boise, ID, US Ecology, Inc. provides environmental services in North America. The company surpassed the Zacks Consensus Estimate in three of the prior four quarters.
Headquartered in Alameda, CA, Penumbra, Inc. (PEN - Free Report) is the designer of medical devices. The company beat the Zacks Consensus Estimate in all the prior four quarters. For 2018 and 2019, the firm will likely post earnings growth of 3,500% and 72.1%, respectively.
North American Construction Group Ltd. (NOA - Free Report) is the provider of services related to mining and heavy construction. In three of the last four quarters, the company surpassed the Zacks Consensus Estimate. The firm will likely post earnings growth of 228.6% and 23.9% in 2018 and 2019, 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.