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Coronavirus Spreads Panic: 5 Low-Beta Stocks to the Rescue
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The stock market has become extremely volatile since investors doubt central banks and governments’ ability to contain the novel coronavirus-led massive economic losses across most sectors.
Hence, it is of paramount importance to create a portfolio of low-beta stocks that are protected from market volatility and have the potential to deliver healthy 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.
Here are four stocks that qualified the screening:
Headquartered in Louisville, KY, Turning Point Brands Inc.’s (TPB - Free Report) prime business is to provide other tobacco products. The company generates sufficient cashflow from its operations that could fund its targeted acquisitions. Notably, the stock is likely to see earnings growth of 10.2% and 22.4% in 2020 and 2021, respectively.
Sprouts Farmers Market, Inc. (SFM - Free Report) , based in Phoenix, AZ, is among the fastest growing retailers in the domestic market and primarily offers affordable organic food products. The stock is likely to see earnings growth of 3.2% and 3.4% in 2020 and 2021, respectively.
Headquartered in Greenwood Village, CO, Newmont Corporation (NEM - Free Report) is among the leading operators in the mining industry, with operations involving exploration and production of gold, copper, and silver. In 2020 and 2021, the stock is likely to see earnings growth of 69.7% and 27%, respectively.
With its microinverter technology, Enphase Energy Inc (ENPH - Free Report) , headquartered in Fremont, CA, has radically transformed the solar industry. In 2020 and 2021, the stock is likely to see earnings growth of 33.7% and 8.7%, 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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Coronavirus Spreads Panic: 5 Low-Beta Stocks to the Rescue
The stock market has become extremely volatile since investors doubt central banks and governments’ ability to contain the novel coronavirus-led massive economic losses across most sectors.
Hence, it is of paramount importance to create a portfolio of low-beta stocks that are protected from market volatility and have the potential to deliver healthy 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.
Here are four stocks that qualified the screening:
Headquartered in Louisville, KY, Turning Point Brands Inc.’s (TPB - Free Report) prime business is to provide other tobacco products. The company generates sufficient cashflow from its operations that could fund its targeted acquisitions. Notably, the stock is likely to see earnings growth of 10.2% and 22.4% in 2020 and 2021, respectively.
Sprouts Farmers Market, Inc. (SFM - Free Report) , based in Phoenix, AZ, is among the fastest growing retailers in the domestic market and primarily offers affordable organic food products. The stock is likely to see earnings growth of 3.2% and 3.4% in 2020 and 2021, respectively.
Headquartered in Greenwood Village, CO, Newmont Corporation (NEM - Free Report) is among the leading operators in the mining industry, with operations involving exploration and production of gold, copper, and silver. In 2020 and 2021, the stock is likely to see earnings growth of 69.7% and 27%, respectively.
With its microinverter technology, Enphase Energy Inc (ENPH - Free Report) , headquartered in Fremont, CA, has radically transformed the solar industry. In 2020 and 2021, the stock is likely to see earnings growth of 33.7% and 8.7%, 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.