5 Solid Low-Beta Stocks to Buy as Market Volatility Returns
Markets have been volatile in January following the year-end rally. The tech rally that drove markets in 2023 also appears to have come to a halt after the benchmark 10-year Treasury yield jumped past the 4% mark, as investors are once again concerned about the Federal Reserve’s next move with interest rate.
Investors are currently trying to assess the time and size of the Federal Reserve’s planned rate cuts in 2024. The optimism surrounding the rate cut that drove markets in December seems to have faded.
The Federal Reserve has hinted that the monetary tightening campaign is about to end as inflation has declined sharply over the past year. Also, several Fed officials indicated that there could be as many as three rate cuts of 25 basis points each in 2024, which had triggered the year-end rally.
However, the Fed’s minutes of the meeting show that the Federal Open Market Committee, despite aiming at three rate cuts by the end of this year, is highly uncertain about how it will happen and if it will happen at all.
Markets are now pricing in a 64% chance that the Federal Reserve will go for a 25-basis point rate cut in March, which has fallen sharply from the 79% seen last week.
Also, both investors and the Fed will be closely watching the inflation data in the near term. Although inflation has declined sharply over the past year, it is still higher than the Fed’s 2% target.
Our Choices
Investors should thus focus on stocks that offer risk-adjusted returns like Atmos Energy Corporation ATO, Consolidated Water Co. Ltd. CWCO, Consolidated Edison, Inc.ED, Ingredion Incorporated INGR and PepsiCo, Inc. PEP.
These companies are regarded as defensive because they are non-cyclical and part of the consumer staples and utilities sectors. This indicates that changes in the market have little impact on these businesses. Also, these stocks belong to the category of low-beta stocks (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank. Each of the stocks has a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atmos Energy Corporation, along with its subsidiaries, is engaged in the regulated natural gas distribution and storage business. ATO serves nearly 3.4 million customers in more than 1,400 communities in eight states, from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energyoperates more than 72,000 miles of transmission and distribution lines as well as 5,700 miles of interstate pipelines.
Atmos Energy has an expected earnings growth rate of 7.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 60 days. ATO presently has a Zacks Rank #2. Atmos Energy has a beta of 0.67 and a current dividend yield of 2.72%.
Consolidated Water Co. Ltd., along with its subsidiaries, is involved in the development and operation of seawater desalination plants and water distribution systems in areas where naturally occurring supplies of potable water are scarce or nonexistent. CWCO also focuses on expanding operations in areas with a large proportion of tourist properties and a growing population.
Consolidated Water Co. has an expected earnings growth rate of 224.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 18.2% over the last 60 days. CWCO presently sports a Zacks Rank #1. Consolidated Water has a beta of 0.15 and a current dividend yield of 1.16%.
Consolidated Edison, Inc. is a diversified utility holding company, with subsidiaries engaged in both regulated and unregulated businesses. ED’s regulated businesses operate through its subsidiaries — Consolidated Edison Company of New York, Orange and Rockland Utilities, Con Edison Clean Energy Businesses, Inc. and Con Edison Transmission, Inc.
Consolidated Edisonhas an expected earnings growth rate of 10.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2% over the last 60 days. ED presently has a Zacks Rank #2. Consolidated Edisonhas a beta of 0.36 and a current dividend yield of 3.46%.
Ingredion Incorporated is an ingredients solutions provider specializing in nature-based sweeteners, starches and nutrition ingredients. INGR serves diverse sectors in food, beverage, brewing, pharmaceuticals and other industries.
Ingredion Incorporated’s expected earnings growth rate for the current year is 24.7%. The Zacks Consensus Estimate for the current-year earnings has improved 1.2% over the past 60 days. INGR presently carries a Zacks Rank #2. Ingredion has a beta of 0.8 and a current dividend yield of 2.91%.
PepsiCo, Inc. is one of the leading global food and beverage companies. PEP’s complementary brands/businesses include Frito-Lay snacks, Pepsi-Cola beverages, Gatorade sports drinks, Tropicana juices and Quaker foods. PepsiCo serves customers in more than 200 countries and territories.
PepsiCo has an expected earnings growth rate of 11.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 60 days. PEP currently has a Zacks Rank #2. PepsiCo has a beta of 0.53 and a current dividend yield of 3.03%.
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Consolidated Edison Inc (ED) : Free Stock Analysis Report
PepsiCo, Inc. (PEP) : Free Stock Analysis Report
Atmos Energy Corporation (ATO) : Free Stock Analysis Report
Ingredion Incorporated (INGR) : Free Stock Analysis Report
Consolidated Water Co. Ltd. (CWCO) : Free Stock Analysis Report
