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In-depth and thorough research are keys to success when it comes to the equity market. Simply following the crowd and investing in risky stocks blindly for lucrative returns will be a wastage of time and money. This is because risky securities derive good returns only when markets are bullish and hence the converse scenario should also be taken into account.
In this article, we are introducing a strategy that shows how to generate handsome returns from less risky stocks.
Beta Understanding
Beta indicates the volatility of a particular stock with respect to the market. In other words, beta measures the extent of stock price movement relative to the market (we are considering S&P 500 here).
If a company has a beta of 1, it means that the relative volatility of the stock is the same as that of the S&P 500. In the same way, if the stock’s beta is greater than 1 then it is more volatile compared to the market. Conversely, a beta below 1 signifies less volatility.
Now, if a portfolio’s beta is 3, it is three times more volatile than the market. Hence, if the market is projected to give 20% return, the portfolio will then definitely contribute 60% return which is amazing.
However, the opposite case also holds true. If the market slips 20% then the portfolio return plummets 60% which is surely a matter of concern.
The Winning Strategy
In our screening criteria, we included beta in the range of 0 to 0.6 for short listing low risk stocks. But this can’t be the only criterion for betting on stocks. The other parameters that need to be added to create a winning portfolio are:
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 five of the seven stocks that qualified the screening:
Headquartered in Portland, OR, Craft Brew Alliance, Inc. is involved in brewing and selling craft beers. The company managed to beat the Zacks Consensus Estimate for earnings in two of the last four quarters, with an average positive surprise of 222.74%. Also, for 2017, we are expecting the company to witness year-over-year earnings improvement of 350%.
Stamps.com — headquartered in El Segundo, CA — is the provider of services that include shipping and mailing letters and parcels through the internet. The company surpassed the Zacks Consensus Estimate for earnings in each of the past four quarters with an average positive earnings surprise of 30.64%. Also, the Zacks Consensus Estimate for earnings for the third quarter has been revised upward over the last 30 days.
Headquartered in San Juan, Puerto Rico, Triple-S Management Corporation isa managed care firm andprovider of insurance products and associated services. During 2017, Triple-S will likely see earnings growth of 561.5%. Also, for full-year 2017, the Zacks Consensus Estimate for earnings has been revised upward over a period of 30 days.
Headquartered in Luxembourg,Orion Engineered Carbons S.A. (OEC - Free Report) is involved in supplying Carbon Black all over the world. The company posted an average positive earnings surprise of 2.22% for the last four quarters. Moreover, for 2017, we are expecting the company to post year-over-year earnings growth of 19%.
SolarEdge Technologies, Inc. (SEDG - Free Report) — headquartered in Herzliya, Israel — is involved in designing and selling optimized inverter systems. The company surpassed the Zacks Consensus Estimate for earnings in all the prior four quarters with an average positive surprise of 21.72%.
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.
Zacks Restaurant Recommendations:In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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Overcome Market Volatility With 5 Low-Beta Stocks
In-depth and thorough research are keys to success when it comes to the equity market. Simply following the crowd and investing in risky stocks blindly for lucrative returns will be a wastage of time and money. This is because risky securities derive good returns only when markets are bullish and hence the converse scenario should also be taken into account.
In this article, we are introducing a strategy that shows how to generate handsome returns from less risky stocks.
Beta Understanding
Beta indicates the volatility of a particular stock with respect to the market. In other words, beta measures the extent of stock price movement relative to the market (we are considering S&P 500 here).
If a company has a beta of 1, it means that the relative volatility of the stock is the same as that of the S&P 500. In the same way, if the stock’s beta is greater than 1 then it is more volatile compared to the market. Conversely, a beta below 1 signifies less volatility.
Now, if a portfolio’s beta is 3, it is three times more volatile than the market. Hence, if the market is projected to give 20% return, the portfolio will then definitely contribute 60% return which is amazing.
However, the opposite case also holds true. If the market slips 20% then the portfolio return plummets 60% which is surely a matter of concern.
The Winning Strategy
In our screening criteria, we included beta in the range of 0 to 0.6 for short listing low risk stocks. But this can’t be the only criterion for betting on stocks. The other parameters that need to be added to create a winning portfolio are:
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 five of the seven stocks that qualified the screening:
Headquartered in Portland, OR, Craft Brew Alliance, Inc. is involved in brewing and selling craft beers. The company managed to beat the Zacks Consensus Estimate for earnings in two of the last four quarters, with an average positive surprise of 222.74%. Also, for 2017, we are expecting the company to witness year-over-year earnings improvement of 350%.
Stamps.com — headquartered in El Segundo, CA — is the provider of services that include shipping and mailing letters and parcels through the internet. The company surpassed the Zacks Consensus Estimate for earnings in each of the past four quarters with an average positive earnings surprise of 30.64%. Also, the Zacks Consensus Estimate for earnings for the third quarter has been revised upward over the last 30 days.
Headquartered in San Juan, Puerto Rico, Triple-S Management Corporation isa managed care firm andprovider of insurance products and associated services. During 2017, Triple-S will likely see earnings growth of 561.5%. Also, for full-year 2017, the Zacks Consensus Estimate for earnings has been revised upward over a period of 30 days.
Headquartered in Luxembourg,Orion Engineered Carbons S.A. (OEC - Free Report) is involved in supplying Carbon Black all over the world. The company posted an average positive earnings surprise of 2.22% for the last four quarters. Moreover, for 2017, we are expecting the company to post year-over-year earnings growth of 19%.
SolarEdge Technologies, Inc. (SEDG - Free Report) — headquartered in Herzliya, Israel — is involved in designing and selling optimized inverter systems. The company surpassed the Zacks Consensus Estimate for earnings in all the prior four quarters with an average positive surprise of 21.72%.
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.
Zacks Restaurant Recommendations:In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »