Yahoo Finance 4 Low-Beta Tech Stocks to Hedge Against the Volatile Market
Technology sector stocks have been hit the hardest amid the U.S. broader market sell-off year to date (YTD). Since early 2022, Wall Street has been witnessing high volatility due to several economic issues. These include Federal Reserve’s aggressive interest rate hikes, the Russia-Ukraine war-led energy crisis and persistent inflation over the last year.
Major stock market indices in the United States like the Dow Jones Industrial Average, Nasdaq Composite and S&P 500 have plunged 5.3%, 26.7% and 14.6%, respectively, YTD. The Zacks Computer and Technology sector has slumped 30.4% in the same time frame.
The near-term prospects of the tech sector look gloomy, given the supply-chain disruptions as a result of the acute shortage of chips, and other input components and currency fluctuations. To add to it, the Federal Reserve’s announcement of a sharp interest rate hike of 0.75% at its Federal Open Market Committee meeting to combat inflation is intensifying vulnerability in the tech space.
The challenges are likely to persist in the near term, affecting the price performances of most tech stocks. But the question is, should investors interested in tech stocks stay away from investing in the space?
We believe that investing in low-beta tech stocks like AT&T T, America Movil AMX, AudioCodes AUDC, and Richardson Electronics RELL can aid investors in hedging against the current highly volatile market environment.
Beta measures a stock's systematic risk or volatility compared with the market. Therefore, a stock with a beta of less than 1.0 will be less sensitive to the market’s movements than a stock with more than 1.0 beta.
Picking the Right Low-Beta Stocks
We have run the Zacks Stocks Screener to identify stocks with a beta between 0.57 and 0.85. We have narrowed our search by considering stocks with a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
All four companies have solid income streams, as these are dividend-paying stocks and are desirable during economic uncertainty. Currently, the stocks are preferred over the non-dividend paying stocks due to their shielding capability through fixed income and lesser sensitivity to price swings. Dividend-paying stocks act as a hedge against economic uncertainty and offer downside protection, with a consistent increase in payouts.
Our Picks
AudioCodes offers advanced voice networking and media processing solutions for the digital workplace. The Israel-based company enables enterprises and service providers to build and operate all-IP voice networks for unified communications, contact centers and hosted business services. The company’s product portfolio includes session border controllers, life cycle management solutions, VoIP network routing solutions, media gateways and servers, multi-service business routers, IP phone solutions and value-added applications, and professional services.
AudioCodes currently sports a Zacks Rank #1. It has a beta of 0.57. Shares of AUDC have lost 43.8% YTD.
AudioCodes Ltd. Price and Consensus
AudioCodes Ltd. price-consensus-chart | AudioCodes Ltd. Quote
AudioCodes is benefitting from secular tailwinds toward IP-based communications by service providers and enterprises. Its product portfolio is well-positioned to capture these tailwinds. The growing popularity of Microsoft Teams is another major positive for the company, given that AUDC is a partner for Microsoft's Operator Connect Accelerator. AudioCodes provides simplified customer onboarding and operation through its Live Cloud solution to service providers, enabling them to sell voice services via the Microsoft Teams Operator Connect Marketplace.
The company’s software initiatives intend to move the business mix toward more high-margin recurring revenue streams over time. The consensus mark for AusioCodes’ 2022 earnings is pegged at $1.40, indicating a 6.7% decrease from the year-ago reported figure. For 2023, the Zacks Consensus Estimate for AUDC earnings expanded to $1.61 per share from $1.58 over the past 60 days. Earnings estimates suggest a 15.4% year-over-year rise.
AudioCodes has a dividend yield of 1.84% and its payout ratio is 38% of earnings at present. Check AUDC’s dividend history here.
Richardson Electronics is a global provider of engineered solutions, serving the radio frequency, wireless and power conversion, electron device, security, and display systems markets. RELL delivers engineered solutions through product manufacturing, systems integration, prototype design and manufacture, testing, and logistics.
Currently, the company flaunts a Zacks Rank #1. Richardson Electronics has a beta of 0.78. Shares of RELL have gained 92.5% YTD.
Richardson Electronics, Ltd. Price and Consensus
Richardson Electronics, Ltd. price-consensus-chart | Richardson Electronics, Ltd. Quote
The long-term expected earnings growth rate for Richardson Electronics is pegged at 20%. The Zacks Consensus Estimate for RELL’s fiscal 2023 earnings is pegged at $1.31 per share, implying an increase of 28.4% from the year-ago reported figure. For fiscal 2024, the consensus mark for earnings has been revised upward to $1.71 per share over the past 60 days, indicating a 30.5% year-over-year fall.
RELL has a dividend yield of 0.92% and its payout ratio is 19% of earnings at present. Check RELL’s dividend history here.
AT&T is one of the world’s leading communications service carriers and North America’s second-largest wireless service provider. The company is witnessing solid subscriber momentum. A customer-centric business model provides the company with healthy growth in its post-paid wireless business, alongside a lower churn rate and higher-tier unlimited plans.
This Zacks Rank #2 company has a beta of 0.61. Shares of T have slumped 22.7% YTD.
Headquartered in Dallas, TX, AT&T is actively investing in key areas of 5G and fiber, and adjusting its business according to the evolving market scenario to fuel long-term growth. While optimizing operations, the company is aiming to increase efficiencies to lower operating costs.
AT&T Inc. Price and Consensus
AT&T Inc. price-consensus-chart | AT&T Inc. Quote
The Zacks Consensus Estimate for T’s 2022 earnings is pegged at $2.61 per share, implying a decrease of 23.2% from the year-ago reported figure. For 2023, the consensus mark for earnings has been revised upward to $2.55 per share over the past 60 days, indicating a 2.5% year-over-year fall.
T has a dividend yield of 5.84% and its payout ratio is 39% of earnings at present. Check T’s dividend history here.
America Movil is the leading provider of integrated telecommunications services in Latin America. It offers enhanced communications solutions with higher data speed transmissions in 25 countries in Latin America, the United States, and Central and Eastern Europe. The company is gaining from an increasing broadband client base and wireless subscriber additions, especially in Brazil, Mexico and Columbia.
This Zacks Rank #2 company has a beta of 0.85. Shares of AMX have plunged 10.5% YTD.
America Movil aims to grow in other parts of the world by continuing to expand its subscriber base through the development of existing businesses and strategic acquisitions. It witnessed a surge in revenues from the Services segment due to the realized synergies from the buyout of Brazil’s Oi this April. Its efforts to increase shareholder value, and lower debt and comprehensive financing costs by selling off cellular towers to Sitios Latino-america bode well in the long term. In third-quarter 2022, the company gained 2.9 million wireless subscribers on an organic basis, including 1.9 million post-paid subscribers. The company also witnessed a 1-million increase in net prepaid subscribers.
The consensus mark for AMX’s 2022 earnings has been revised upward to $1.29 per share from $1.27 over the past seven days, indicating a 26.5% year-over-year increase. For 2023, the Zacks Consensus Estimate for earnings increased to $1.56 per share from $1.53 over the past seven days, indicating year-over-year growth of 20.5%.
America Movil, S.A.B. de C.V. Price and Consensus
America Movil, S.A.B. de C.V. price-consensus-chart | America Movil, S.A.B. de C.V. Quote
AMX has a dividend yield of 2.32% and its payout ratio is 51% of earnings at present. Check AMX’s dividend history here.
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AT&T Inc. (T) : Free Stock Analysis Report
America Movil, S.A.B. de C.V. (AMX) : Free Stock Analysis Report
Richardson Electronics, Ltd. (RELL) : Free Stock Analysis Report
AudioCodes Ltd. (AUDC) : Free Stock Analysis Report
