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Risky stocks will not always prove rewarding for investors. The securities prove profitable only when the market is bullish. However, we have created a strategy that clearly shows that handsome returns can also be generated from less risky stocks if some other parameters are considered.
Meaning of 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.
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.
Here are five of the 15 stocks that qualified the screening:
The Marcus Corporation (MCS - Free Report) , based in Milwaukee, WI, with its huge base of real estate properties is primarily involved in lodging and entertainment industries. The company beat the Zacks Consensus Estimate in three of the prior four quarters. The firm will like see earnings growth of 22.1% and 4.3% through fiscal 2018 and fiscal 2019, respectively.
Headquartered in Vancouver, WA, Papa Murphy’s Holdings, Inc. (FRSH - Free Report) is involved in selling fresh to be baked pizzas. The company posted an average positive earnings surprise of 454.2% for the past four quarters. For fiscal 2018 and 2019, Papa Murphy’s will likely see respective earnings growth of 160% and 24.4%.
Dr. Reddy’s Laboratories Ltd. (RDY - Free Report) , headquartered in Hyderabad, India, is the provider of innovative medicines at affordable rates. We expect Dr. Reddy’s Laboratories to see earnings growth of 40.6% and 50% in fiscal 2019 and 2020, respectively.
Headquartered in Palo Alto, CA, Tesla, Inc. (TSLA - Free Report) is the leading manufacturer of electric car. The firm surpassed the Zacks Consensus Estimate in three of the past four quarters. Tesla will likely see earnings growth of 85.6% and 537.5% in 2018 and 2019, respectively.
Spirit Airlines (SAVE - Free Report) , headquartered in Miramar, FL, basically offers choices for customizable travelling. The company beat the Zacks Consensus Estimate in the prior four quarters. For 2018 and 2019, the stock will likely see earnings growth of 11.7% and 23.3%, 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.
Image: Bigstock
5 Low-Beta Stocks to Weather Market Volatility
Risky stocks will not always prove rewarding for investors. The securities prove profitable only when the market is bullish. However, we have created a strategy that clearly shows that handsome returns can also be generated from less risky stocks if some other parameters are considered.
Meaning of 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.
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.
Here are five of the 15 stocks that qualified the screening:
The Marcus Corporation (MCS - Free Report) , based in Milwaukee, WI, with its huge base of real estate properties is primarily involved in lodging and entertainment industries. The company beat the Zacks Consensus Estimate in three of the prior four quarters. The firm will like see earnings growth of 22.1% and 4.3% through fiscal 2018 and fiscal 2019, respectively.
Headquartered in Vancouver, WA, Papa Murphy’s Holdings, Inc. (FRSH - Free Report) is involved in selling fresh to be baked pizzas. The company posted an average positive earnings surprise of 454.2% for the past four quarters. For fiscal 2018 and 2019, Papa Murphy’s will likely see respective earnings growth of 160% and 24.4%.
Dr. Reddy’s Laboratories Ltd. (RDY - Free Report) , headquartered in Hyderabad, India, is the provider of innovative medicines at affordable rates. We expect Dr. Reddy’s Laboratories to see earnings growth of 40.6% and 50% in fiscal 2019 and 2020, respectively.
Headquartered in Palo Alto, CA, Tesla, Inc. (TSLA - Free Report) is the leading manufacturer of electric car. The firm surpassed the Zacks Consensus Estimate in three of the past four quarters. Tesla will likely see earnings growth of 85.6% and 537.5% in 2018 and 2019, respectively.
Spirit Airlines (SAVE - Free Report) , headquartered in Miramar, FL, basically offers choices for customizable travelling. The company beat the Zacks Consensus Estimate in the prior four quarters. For 2018 and 2019, the stock will likely see earnings growth of 11.7% and 23.3%, 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.
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.