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Beat Market Volatility With These 5 Low-Beta Stocks

Nilanjan Banerjee

It is widely believed that taking risks prove beneficial in the world of equity investment. However, risky stocks deliver solid returns only in bullish market conditions. Thus, it would be ideal to invest in low-beta stocks as they are less correlated to the market and thus have the potential to deliver impressive returns.

What is Beta?

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.

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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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Here are five of the 14 stocks that fit the bill:

Headquartered in St. Louis, MO Post Holdings Inc. POST manufactures ready-to-eat cereals. The company’s earnings beat the Zacks Consensus Estimate in three of the last four quarters, the average positive beat being 12.54%. In fiscal year 2020 and 2021, the stock is likely to see earnings growth of 4.5% and 14.6%, respectively.

Arcosa Inc. ACA, headquartered in Dallas, TX, is primarily involved in providing infrastructure-related products. The company is expected to have seen earnings growth of 25.3% in 2019. In 2020, the stock is likely to witness earnings growth of 14.5%.

Headquartered in Oak Brook, IL, Great Lakes Dredge & Dock Corporation GLDD is primarily engaged in providing services related to dredging. The company is expected to have recorded earnings growth of 358.8% in 2019. In 2020, the stock is likely to see earnings growth of 10.3%.

Denny's Corporation DENN, headquartered in Spartanburg, SC, is primarily involved in operating full-service restaurant chains. In 2020, the stock is likely to see earnings growth of 18.1%.

Headquartered in Dallas, TX, Match Group, Inc. MTCH is mainly involved in providing dating products. The company is expected to have seen earnings growth of 38.2% in 2019. The same for 2020 is estimated to be 3.1%.

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.


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Match Group, Inc. (MTCH) : Free Stock Analysis Report
 
Great Lakes Dredge & Dock Corporation (GLDD) : Free Stock Analysis Report
 
Post Holdings, Inc. (POST) : Free Stock Analysis Report
 
Denny's Corporation (DENN) : Free Stock Analysis Report
 
Arcosa, Inc. (ACA) : Free Stock Analysis Report
 
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