Back to top

Image: Bigstock

5 Low-Beta Stocks to Help You Fend Off Market Volatility

Read MoreHide Full Article

In-depth research plays a vital role in the field of investment. The belief that only risky securities generate the best returns is questionable. In fact, such stocks prove rewarding only during bullish market conditions.

However, there are strategies that show that low-risk stocks can also fetch attractive returns.

Beta Understanding

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.

Screening Criteria:

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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Here are five of the 21 stocks that qualified the screening:

Headquartered in Louisville, KY, Papa John's International, Inc. (PZZA - Free Report) is among the largest pizza delivery firms in the world. The Zacks Consensus Estimate for the company’s 2019 earnings per share has been revised upward over the past 60 days.

Aaron's, Inc. (AAN - Free Report) , headquartered in Atlanta, GA, primarily offers solutions related to omnichannel lease purchases. The company is likely to see earnings growth of 14% through 2019. The Zacks Consensus Estimate for the company’s 2019 earnings per share has also been revised upward over the past 60 days.

Based in Old Greenwich, CT, Ellington Financial Inc. (EFC - Free Report) is primarily involved in investing in various financial assets, comprising mortgage-backed securities. The company is likely to see earnings growth of 21% through 2019.

Denny's Corporation (DENN - Free Report) , headquartered in Spartanburg, SC, is primarily involved in operating full-service restaurants across the world. The company has an average positive earnings surprise of 8% for the last four quarters. Moreover, over the past 60 days, the Zacks Consensus Estimate for its 2019 has been revised upward.

Headquartered in Los Angeles, CA, Guess?, Inc. (GES - Free Report) , being the operator of retails stores across the globe, is primarily involved in designing and distributing wide varieties of apparel, watches and other consumer products. In fiscal years 2020 and 2021, the stock is likely to witness earnings growth of roughly 29% and 27%, 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.