Escalating tensions between Washington and Tehran have made the broader equity market extremely volatile. After the recent U.S. airstrike killed Iran’s top commander General Qasem Soleimani in Baghdad, Tehran retaliated by firing more than a dozen ballistic missiles at U.S. troops in Iraq.
Thus, it would be ideal to invest in low-beta stocks as they are less correlated to the market and thus tend to be less volatile.
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. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are five of the 11 stocks that fit the bill:
Headquartered in Vancouver, Canada, Pan American Silver Corp. (PAAS - Free Report) is primarily involved in the extraction and development of silver mines. The company has a trailing four-quarter positive earnings surprise of 62%, on average. For 2019, the company is likely to report earnings growth of 56.4%. Moreover, in 2020, Pan American Silver is expected to see earnings growth of 38.1%.
Arcosa Inc. (ACA - Free Report) , headquartered in Dallas, TX, is primarily involved in providing infrastructure-related products. The company is likely to report earnings growth of 25.3% for 2019. In 2020, the stock is expected to see earnings growth of 14.5%.
North American Construction Group Ltd. (NOA - Free Report) is primarily involved in providing services related to heavy construction and mining. For 2019, the company is likely to report earnings growth of 228.6%. In 2020, we expect the firm to record earnings growth of 13.8%.
Based in Mexico City, Mexico, América Móvil SAB de CV (AMX - Free Report) is primarily involved in providing integrated telecommunications services. In 2020, the company is likely to see earnings growth of 14.6%. Moreover, the firm is expected to have reported earnings growth of roughly 34% in 2019.
Helen of Troy Limited (HELE - Free Report) , based in Hamilton, Bermuda, is a leading distributer of consumer products. For fiscal 2020 and 2021, the stock is likely to see earnings growth of 7.8% and 11%, 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.
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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.