Market Volatility is Not a Worry With These 5 Low-Beta Stocks
Successful investors never follow the crowd blindly for selecting lucrative stocks. Instead they do their own research intensively. The crowd generally believes that risky stocks can only reward investors with handsome returns. However, the strategy works only when the market is bullish.
We have created a strategy which clearly shows securities with lower risks could also fetch investors with impressive returns if certain parameters are considered.
Meaning of Beta
Beta measures the volatility or risks to a security relative to the market (we are considering the S&P 500 here). That is, beta measures the extent to which the price of a stock moves with respect to the market.
If the beta is equal to 1 it means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1.
For example, if the beta is 1.8 then the stock will witness 80% more movement than the market. Hence, we can say that if the market goes up, the stock will outperform by 80%. Conversely, if the market plunges, the stock will lose much more value than the market.
Building a Low-Risk Portfolio
In order to find stocks with lower-than-market volatility, we added beta between 0 and 0.6 as our main criterion for screening. However, we need to keep in mind that low beta is not the only metric to be considered for choosing stocks in a volatile market. Hence to reach the winning strategy, we have considered a few additional criteria.
Percentage Change in Price in the last 4 Weeks: We considered those stocks that saw positive price movement over the last month.
Average 20 Day Volume greater than or equal to 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 22 stocks that fit the bill:
Headquartered in Rosemont, US Foods Holding Corp. USFD is primarily involved in distributing foodservices. The company surpassed the Zacks Consensus Estimate in three of the prior four quarters, the average positive earnings surprise being 2.7%. We are expecting the stock to witness earnings growth of 48.6% and 18.9% for 2018 and 2019, respectively.
Medifast, Inc. MED, headquartered in Baltimore, MD, is the prime manufacturer of nutritional products for leading a healthy lifestyle. The company’s average positive earnings surprise for the past three quarters stands at 12.3%. Medifast will likely post earnings growth of 41.9% and 23.1% for 2018 and 2019, respectively.
The Marcus Corporation MCS, headquartered in Milwaukee, WI, belongs to entertainment industry, with operatorship interests in hotels and movie theaters. The firm surpassed the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 6.3%. For 2018 and 2019, the stock will likely witness earnings growth of 16.9% and 9.4% for 2018 and 2019, respectively.
Acushnet Holdings Corp. GOLF is the leading distributer and manufacturer of golf products. The company’s average positive earnings surprise for the past four quarters stands at 7.2%. Also, for 2018 and 2019, the company will likely witness earnings growth of 28.5% and 7.9%, respectively.
Headquartered in Glendale, CA, Dine Brands Global, Inc. DIN, is the world’s leading full-service restaurant player. The firm beat the Zacks Consensus Estimate in all the prior four quarters. For 2018 and 2019, the stock will likely report earnings growth of 22.7% and 16.2%, 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.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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MEDIFAST INC (MED): Free Stock Analysis Report
US Foods Holding Corp. (USFD): Free Stock Analysis Report
Marcus Corporation (The) (MCS): Free Stock Analysis Report
Acushnet Holdings Corp. (GOLF): Free Stock Analysis Report
DineEquity, Inc (DIN): Free Stock Analysis Report
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