The coronavirus pandemic has hammered the global economy since strict social-distancing measures taken across countries to contain the spread of the virus has shut down businesses. Although investors are optimistic about the reopening of economies, the positivity is unlikely to stay unless there is any drug or vaccine that will be a permanent solution to COVID-19.
Hence, creating a portfolio of low-beta stocks is of utmost importance since the securities can not only deliver healthy returns but also provide a shield against market volatility.
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. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are five of the 18 stocks that qualified the screening:
B&G Foods, Inc. BGS, headquartered in Parsippany, NJ, has seen its stock price jump 29.3% year to date. This is because consumers are avoiding dine-in restaurants owing to the virus outbreak and are instead stocking up pantries. Being a leading manufacturer and distributer of shelf-stable and frozen food, B&G Foods has been witnessing mounting demand for its products.
The stock has also seen upward earnings estimate revisions for 2020 in the past 30 days and is likely to see earnings growth of 21.3% this year.
Sprouts Farmers Market, Inc. SFM, based in Phoenix, AZ, is among the fastest growing retailers in the domestic market and primarily offers affordable organic food products. The stock is likely to see earnings growth of 29.6% in 2020.
Headquartered in Oakland, CA, The Clorox Company CLX is engaged in the production, marketing and sale of consumer products in the United States and international markets. The company managed to beat the Zacks Consensus Estimate for earnings in the last four quarters, the average positive surprise being 6.5%. In the next five years, the stock is likely to see earnings growth of 5.8%.
Based in Sandton, South Africa, Gold Fields Limited GFI is a leading producer of gold. The stock is likely to see earnings growth of 31% and 88% in 2020 and 2021, respectively.
BJ’s Wholesale Club Holdings, Inc. BJ: BJ’s Wholesale is an operator of membership warehouse clubs, primarily in the U.S. East Coast. Sporting a VGM Score of A, this Westborough, MA-headquartered company’s expected EPS growth rate for five years is 12.6%, comparing favorably with the industry's estimated growth rate of 10.7%.
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.
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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.
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BJs Wholesale Club Holdings, Inc. (BJ) : Free Stock Analysis Report
The Clorox Company (CLX) : Free Stock Analysis Report
Gold Fields Limited (GFI) : Free Stock Analysis Report
BG Foods, Inc. (BGS) : Free Stock Analysis Report
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
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