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Volatility Concerns? Bet on 4 Low-Beta Stocks: ERIE, SFM, NEM, UL
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Investors are bracing for a volatile market this week as key economic data are set to be released, including job openings, jobless claims and the crucial nonfarm payrolls report. These labor market figures will likely influence the Federal Reserve's decision on its upcoming rate cut, which could vary from a standard adjustment to a more substantial reduction, impacting broader market dynamics.
Given this uncertainty, constructing a portfolio of low-beta stocks may be prudent. In this regard, stocks like Erie Indemnity Company (ERIE - Free Report) , Sprouts Farmers Market Inc. (SFM - Free Report) , Newmont Corporation (NEM - Free Report) and Unilever (UL - Free Report) are worth betting on.
What Does the Beta of a Stock Measure?
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 Using Research Wizard:
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 among 17 stocks that qualified for the screening:
Erie Indemnity
Erie Indemnity has witnessed a rise in management fee revenues from policy issuance and renewal services. Increasing management fee revenues from administrative services are also aiding Erie Indemnity. Further, compared to the composite stocks belonging to the industry, the company has a much stronger balance sheet.
Sprouts Farmers Market
Increasing engagement of customers and solid comparable store sales are aiding Sprouts Farmers Market. The company's board of directors has approved a new $600 million share repurchase program, reflecting its robust cash flow generation. In 2024, SFM plans to open roughly 35 new stores and anticipates total sales growth in the range of 9% to 10%.
Newmont
Newmont, a leading explorer and producer of gold, is advancing on its divesture program and is well-focused on repurchasing shares and reducing its debt burden. NEM owns a top-quality collection of Tier 1 assets, which are considered high-value, low-cost and long-life mining assets. This strong portfolio is expected to provide the company with the ability to generate sustainable, profitable and responsible gold production for many years to come.
Unilever
Unilever, renowned for its strong portfolio of brands, is among the world's leading consumer goods companies. The company generates billions of dollars in turnover, with more than 55% coming from emerging markets. Unilever has a vast customer base, with 3.4 billion people using its products daily.
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
Volatility Concerns? Bet on 4 Low-Beta Stocks: ERIE, SFM, NEM, UL
Investors are bracing for a volatile market this week as key economic data are set to be released, including job openings, jobless claims and the crucial nonfarm payrolls report. These labor market figures will likely influence the Federal Reserve's decision on its upcoming rate cut, which could vary from a standard adjustment to a more substantial reduction, impacting broader market dynamics.
Given this uncertainty, constructing a portfolio of low-beta stocks may be prudent. In this regard, stocks like Erie Indemnity Company (ERIE - Free Report) , Sprouts Farmers Market Inc. (SFM - Free Report) , Newmont Corporation (NEM - Free Report) and Unilever (UL - Free Report) are worth betting on.
What Does the Beta of a Stock Measure?
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 Using Research Wizard:
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 among 17 stocks that qualified for the screening:
Erie Indemnity
Erie Indemnity has witnessed a rise in management fee revenues from policy issuance and renewal services. Increasing management fee revenues from administrative services are also aiding Erie Indemnity. Further, compared to the composite stocks belonging to the industry, the company has a much stronger balance sheet.
Sprouts Farmers Market
Increasing engagement of customers and solid comparable store sales are aiding Sprouts Farmers Market. The company's board of directors has approved a new $600 million share repurchase program, reflecting its robust cash flow generation. In 2024, SFM plans to open roughly 35 new stores and anticipates total sales growth in the range of 9% to 10%.
Newmont
Newmont, a leading explorer and producer of gold, is advancing on its divesture program and is well-focused on repurchasing shares and reducing its debt burden. NEM owns a top-quality collection of Tier 1 assets, which are considered high-value, low-cost and long-life mining assets. This strong portfolio is expected to provide the company with the ability to generate sustainable, profitable and responsible gold production for many years to come.
Unilever
Unilever, renowned for its strong portfolio of brands, is among the world's leading consumer goods companies. The company generates billions of dollars in turnover, with more than 55% coming from emerging markets. Unilever has a vast customer base, with 3.4 billion people using its products daily.
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.