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5 Low-Beta Stocks to Keep You Calm Despite Market Volatility
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It is widely believed that only risky stocks generate lucrative returns. Although the strategy works in bullish market conditions, it leads to paltry returns when the market turns bearish.
Thus, it seems wise to invest in some promising low-beta stocks as these have the potential to deliver impressive returns even in bearish market environment owing to low market correlation.
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 17 stocks that qualified the screening:
Headquartered in Anoka, MN, Vista Outdoor Inc. (VSTO - Free Report) is among the leading manufacturer and designers of consumer products in the recreation industry and outdoor sports. The company stands out, especially for its outdoor product categories on steady rise in consumer spending. For fiscal 2020 and 2021, the stock is likely to see earnings growth of 43% and 88%, respectively.
Headquartered in Redwood City, CA, Guardant Health, Inc. (GH - Free Report) is among the leading precision oncology companies and helps improve patient clinical outcomes with minimum healthcare costs. In 2019, the company is likely to have seen earnings growth of almost 69%. Moreover, over the past 30 days, the company has witnessed positive estimate revisions for its bottom line for 2020.
Computer Programs and Systems, Inc. , headquartered in Mobile, AL, is primarily involved in providing healthcare solutions and services and thereby helping shape community healthcare. The stock is likely to see earnings growth of 5% and 8.2% in 2020 and 2021, respectively.
MicroStrategy Incorporated (MSTR - Free Report) , headquartered in Tysons Corner, VA, is among the leading providers of enterprise analytics software and services. The company’s cost-control initiatives have been boosting gross margin. Notably, for 2020, the company is likely to see earnings growth of 25% in 2020.
On a gold-equivalent basis, Sibanye Gold Limited — headquartered in Weltevreden Park, South Africa — is the third-largest producer of gold in the world. Notably, the company has witnessed positive earnings estimate revision for 2020 in the past 30 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.
Image: Bigstock
5 Low-Beta Stocks to Keep You Calm Despite Market Volatility
It is widely believed that only risky stocks generate lucrative returns. Although the strategy works in bullish market conditions, it leads to paltry returns when the market turns bearish.
Thus, it seems wise to invest in some promising low-beta stocks as these have the potential to deliver impressive returns even in bearish market environment owing to low market correlation.
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 17 stocks that qualified the screening:
Headquartered in Anoka, MN, Vista Outdoor Inc. (VSTO - Free Report) is among the leading manufacturer and designers of consumer products in the recreation industry and outdoor sports. The company stands out, especially for its outdoor product categories on steady rise in consumer spending. For fiscal 2020 and 2021, the stock is likely to see earnings growth of 43% and 88%, respectively.
Headquartered in Redwood City, CA, Guardant Health, Inc. (GH - Free Report) is among the leading precision oncology companies and helps improve patient clinical outcomes with minimum healthcare costs. In 2019, the company is likely to have seen earnings growth of almost 69%. Moreover, over the past 30 days, the company has witnessed positive estimate revisions for its bottom line for 2020.
Computer Programs and Systems, Inc. , headquartered in Mobile, AL, is primarily involved in providing healthcare solutions and services and thereby helping shape community healthcare. The stock is likely to see earnings growth of 5% and 8.2% in 2020 and 2021, respectively.
MicroStrategy Incorporated (MSTR - Free Report) , headquartered in Tysons Corner, VA, is among the leading providers of enterprise analytics software and services. The company’s cost-control initiatives have been boosting gross margin. Notably, for 2020, the company is likely to see earnings growth of 25% in 2020.
On a gold-equivalent basis, Sibanye Gold Limited — headquartered in Weltevreden Park, South Africa — is the third-largest producer of gold in the world. Notably, the company has witnessed positive earnings estimate revision for 2020 in the past 30 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.