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Buy These 4 Low-Beta Stocks to Counter the Choppy Market
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There have been signs of disinflation, which could be encouraging. But, with slowing U.S. business activity and expectations of tepid second-quarter earnings, the broader market will likely be extremely volatile. Hence, creating a portfolio of low-beta stocks is of utmost importance since the securities will deliver healthy returns and shield against choppy market conditions.
Beta measures the volatility or risk of a particular asset compared 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 a 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 a 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 a beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. However, 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 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 four stocks among nine that qualified for the screening:
Autohome is a leading provider of professionally generated content, user-generated content and AI-generated content to automobile consumers. As a result, it is capable of reaching a huge user base of automobile consumers. Thus, for conducting advertising campaigns, dealers and automakers are considering ATHM as a preferred platform.
Arcosa has a strong geographic footprint and a well-diversified portfolio and solutions that could support infrastructure growth. Arcosa is also leading the market when it comes to the products that are key to transportation infrastructure.
Trip.com Group Limited is well known for providing global travel services. Owing to the relaxation of travel restrictions, the global travel industry is recovering, which in turn is aiding TCOM.
RLI Corp. is a well-known name with deep underwriting expertise. RLI boasts that it has been delivering underwriting profits for 27 successive years.
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.
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Buy These 4 Low-Beta Stocks to Counter the Choppy Market
There have been signs of disinflation, which could be encouraging. But, with slowing U.S. business activity and expectations of tepid second-quarter earnings, the broader market will likely be extremely volatile. Hence, creating a portfolio of low-beta stocks is of utmost importance since the securities will deliver healthy returns and shield against choppy market conditions.
In this regard, stocks like Arcosa Inc. (ACA - Free Report) , Trip.com Group Limited (TCOM - Free Report) , Autohome Inc. (ATHM - Free Report) and RLI Corp. (RLI - Free Report) are worth betting on.
Understanding Beta
Beta measures the volatility or risk of a particular asset compared 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 a 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 a 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 a beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. However, 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 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 four stocks among nine that qualified for the screening:
Autohome is a leading provider of professionally generated content, user-generated content and AI-generated content to automobile consumers. As a result, it is capable of reaching a huge user base of automobile consumers. Thus, for conducting advertising campaigns, dealers and automakers are considering ATHM as a preferred platform.
Arcosa has a strong geographic footprint and a well-diversified portfolio and solutions that could support infrastructure growth. Arcosa is also leading the market when it comes to the products that are key to transportation infrastructure.
Trip.com Group Limited is well known for providing global travel services. Owing to the relaxation of travel restrictions, the global travel industry is recovering, which in turn is aiding TCOM.
RLI Corp. is a well-known name with deep underwriting expertise. RLI boasts that it has been delivering underwriting profits for 27 successive years.
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.