We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Fight Simmering Trade Tensions With These 5 Low-Beta Stocks
Read MoreHide Full Article
Securities with significant exposure to markets perform well only when the market is bullish. Such stocks generally underperform the market when investor sentiments are bearish. Presently, the global market seems uncertain as fresh trade tensions are brewing between the United States and China.
Hence, to tide over market volatility, we have presented a strategy to create a portfolio of low-beta stocks that are likely to reward investors with stable returns.
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 10 stocks that fit the bill:
lululemon athletica inc. (LULU - Free Report) , based in Vancouver, Canada, is a provider of athletic apparel. The company managed to beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being almost 20%. The company will likely see earnings growth of 21% and 16.1% in fiscal year 2019 and 2020, respectively.
Rent-A-Center, Inc. — headquartered in Plano, TX — helps customers own computers, appliances, consumer electronics etc. under flexible rental purchase deals. The company beat the Zacks Consensus Estimate in the prior four quarters, the average positive earnings surprise being 74%.Rent-A-Center is likely to see earnings growth of 80.2% and 19.2% through 2019 and 2020, respectively.
Headquartered in Kearney, NE,The Buckle, Inc. (BKE - Free Report) is a leading retailer of footwear and casual apparel. The company managed to surpass the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 4.2%.
Headquartered in Pembroke, Bermuda, Argo Group International Holdings, Ltd. , is primarily involved in underwriting reinsurance products. The company beat the Zacks Consensus Estimate in the last four quarters. Through 2019 and 2020, the stock is likely to grow 30.4% and 9.1%, respectively.
FTI Consulting, Inc. (FCN - Free Report) , headquartered in Washington, District of Columbia, is primarily involved in providing services related to business advisory. The company beat the Zacks Consensus Estimate in the last four quarters. FTI Consulting is likely to see earnings growth of 6% and 2% in 2019 and 2020, 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
Fight Simmering Trade Tensions With These 5 Low-Beta Stocks
Securities with significant exposure to markets perform well only when the market is bullish. Such stocks generally underperform the market when investor sentiments are bearish. Presently, the global market seems uncertain as fresh trade tensions are brewing between the United States and China.
Hence, to tide over market volatility, we have presented a strategy to create a portfolio of low-beta stocks that are likely to reward investors with stable returns.
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 10 stocks that fit the bill:
lululemon athletica inc. (LULU - Free Report) , based in Vancouver, Canada, is a provider of athletic apparel. The company managed to beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being almost 20%. The company will likely see earnings growth of 21% and 16.1% in fiscal year 2019 and 2020, respectively.
Rent-A-Center, Inc. — headquartered in Plano, TX — helps customers own computers, appliances, consumer electronics etc. under flexible rental purchase deals. The company beat the Zacks Consensus Estimate in the prior four quarters, the average positive earnings surprise being 74%.Rent-A-Center is likely to see earnings growth of 80.2% and 19.2% through 2019 and 2020, respectively.
Headquartered in Kearney, NE,The Buckle, Inc. (BKE - Free Report) is a leading retailer of footwear and casual apparel. The company managed to surpass the Zacks Consensus Estimate in three of the last four quarters, the average positive earnings surprise being 4.2%.
Headquartered in Pembroke, Bermuda, Argo Group International Holdings, Ltd. , is primarily involved in underwriting reinsurance products. The company beat the Zacks Consensus Estimate in the last four quarters. Through 2019 and 2020, the stock is likely to grow 30.4% and 9.1%, respectively.
FTI Consulting, Inc. (FCN - Free Report) , headquartered in Washington, District of Columbia, is primarily involved in providing services related to business advisory. The company beat the Zacks Consensus Estimate in the last four quarters. FTI Consulting is likely to see earnings growth of 6% and 2% in 2019 and 2020, 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.