The market has become extremely volatile owing to the ongoing coronavirus pandemic. Hence, creating a portfolio of low-beta stocks is of utmost importance since the securities could not only deliver healthy returns but could also provide a shield against market volatility
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.
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 17 stocks that qualified the screening:
Headquartered in Oakland, CA, The Clorox Company (CLX - Free Report) is engaged in the production, marketing and sale of consumer products in the U.S. and international markets. The company managed to beat the Zacks Consensus Estimate for earnings in the last four quarters, with the average positive surprise being 6.5%. In the next five years, the stock is likely to see earnings growth of 5.8%.
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 25.6% in 2020.
Eli Lilly and Company (LLY - Free Report) , headquartered in Indianapolis, IN, is a leading manufacturer of pharmaceutical products. The stock is likely to see earnings growth of 12.8% and 17.7% in 2020 and 2021, respectively.
Based in Sandton, South Africa, Gold Fields Limited (GFI - Free Report) is a leading producer of gold. The stock is likely to see earnings growth of 31% and 88% in 2020 and 2021, respectively.
AngloGold Ashanti Limited (AU - Free Report) , headquartered in Johannesburg, South Africa, is also a leading gold mining player. In 2020 and 2021, the stock is likely to see earnings growth of 113.2% and 43.6%, 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.