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5 Low-Beta Stocks to Buy as Trade Conflict Intensifies

Swarup Gupta
DG vs. TJX: Which Stock Is the Better Value Option?

President Trump has upped the ante against China in a standoff, which is fast developing into a full-fledged trade war. On the evening of Jun 18, he threatened to impose tariffs on another $200 billion of Chinese goods, escalating trade tensions. China responded strongly on the morning of Jun 19, promising to retaliate if such tariffs indeed come into effect.

Meanwhile, the Dow logged its fifth straight daily decline on Jun 18 as investors remained jittery over the standoff between the two countries. Since these events could drastically dent investor confidence, picking value stocks with low-beta looks like a smart option at this point.

Beta measures the tendency of a stock's returns to respond to market swings. Low correlation stocks provide protection during turbulent times as they are less prone to day-to-day fluctuations.

Additional Tariffs in the Offing, China to Retaliate

On the evening of Jun 18, Trump said that he has asked the U.S. Trade Representative to identify $200 billion worth of Chinese imports on which additional tariffs of 10% could be imposed. These tariffs would be enforced “if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.”

In the event that China chooses to retaliate, tariffs would be levied on another $200 billion of goods. China issued a strong response to this statement on the morning of Jun 19, characterizing the move as “extreme pressure and blackmail.” The country’s Commerce Ministry has promised to adopt “quantitative and qualitative measures and retaliate forcefully” in case the United States goes ahead with its decision.

Trump Slaps Tariffs, China Strikes Back

This fresh exchange comes almost immediately after the two countries had imposed retaliatory tariffs on each other. On Jun 15, President Trump announced that the United States is imposing tariffs on $50 billion of China’s imports. Also, he said that the United States “will pursue additional tariffs” in case China pursues retaliatory measures.

On Jun 16, China’s finance ministry stated that it will launch tariffs of 25% on $50 billion of U.S. imports. Tariffs on $34 billion of U.S. imports, primarily on agricultural goods, will commence from Jul 6.  (Read: 6 Defensive Stocks to Buy as Trade Tensions Flare Up)

Our Choices

Trade tensions between the United States and China have undergone further escalation after Trump’s recent proclamation. With Trump bent on reducing the country’s trade deficit with China, such tensions are unlikely to die down soon. Investors will have to grapple with turbulent market conditions in the interim. In such an event, it would be best to add some safe bets to your portfolio in order to shore up gains.

This is why it makes good sense to pick value stocks with low beta, which could protect gains made recently. Our selection is also backed by a good Zacks Value Score and Zacks Rank.

We narrowed down our choices with the help of our new style score system.

Our research shows that stocks with a Value Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best investment opportunities in the value investing space.

Equinor ASA EQNR operates as an energy company. It engaged in developing oil, gas, wind and solar energy projects and focuses on offshore operations and exploration services.

Equinor sports a Zacks Rank #1 (Strong Buy) and has a Value Style Score of A. The stock has a beta value of 0.95. The forward price-to-earnings ratio (P/E) for the current financial year (F1) is 15.79, lower than the industry average of 19.76. It has a PEG ratio of 0.79, lower than the industry average of 2.50.

Eni S.p.A. E with its consolidated subsidiaries is engaged in oil and gas, electricity generation, petrochemicals, oilfield services and engineering industries.

Eni holds a Value Style Score of A. The stock has a beta value of 0.86 and a PEG ratio of 0.83, lower than the industry average of 1.16. The stock has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

PCM, Inc. PCMI is a technology solutions provider to businesses, government and educational institutions and individual consumers.

PCM holds a Zacks Rank #2 (Buy) has a Value Style Score of A. The stock has a beta value of 0.49 and a P/E (F1) of 8.96x, lower than the industry average of 17.84. It has a PEG ratio of 0.45, lower than the industry average of 1.38.

Jazz Pharmaceuticals plc JAZZ is a specialty biopharmaceutical company with a focus on the areas of sleep and hematology/oncology.

Jazz Pharmaceuticals holds a Zacks Rank #2 and has a Value Style Score of B. The stock has a beta value of 0.96 and a P/E (F1) of 15.29x, lower than the industry average of 19.84. It has a PEG ratio of 0.91, lower than the industry average of 1.55.

Assurant Inc. AIZ is a premier provider of specialized insurance products in North America and other selected markets overseas.

Assurant carries a Zacks Rank #2 and has a Value Style Score of B. The stock has a beta value of 0.53 and a PEG ratio of 0.65, lower than the industry average of 1.11.

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