7 Low-Volatility Stocks to Buy if You’re a Concerned Investor
Immediately following the initial shock of the COVID-19 pandemic, the narrative of low-volatility stocks admittedly didn’t make much sense. With the benefit of hindsight, we can see that the additional influx of cash that retail investors had poured into higher-risk ventures. As a result, the traditional safe stocks fell by the wayside, replaced with a hunger for robust capital gains.
Well, that paradigm shifted rather abruptly, hasn’t it? Now, it’s true that certain catalysts – most notably a hotter-than-expected September jobs report – seem to suggest that a bull cycle may once again dominate affairs. Unfortunately, though, more employed individuals translate to higher inflation. Subsequently, the Federal Reserve may raise interest rates, incentivizing only a few segments such as stable stocks.
Given that Wall Street’s focus may be moving toward wealth protection rather than outright accumulation, it may be time to consider low-beta securities. Yes, they’re boring and incredibly conservative. But they just might protect you from the storm. On that note, below are low-volatility stocks to consider.
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Sterling Check (STER)
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A human resources specialist, Sterling Check (NASDAQ:STER) – as the name might give away – specializes in background checks and identity verifications. Fundamentally, every company succeeds (or fails) because of its people. Therefore, it’s vital to hire the right contributors. Moving forward, should the Fed raise rates and inadvertently spark a recession, background checks will become even more vital.
Basically, job applicants will become desperate in an economic downturn, meaning that enterprises must sift through volumes of paperwork. Potentially, Sterling Check may help. Almost certainly, STER can help investors make a decision based on its ultra-low 60-month beta of 0.17. As one of the low-volatility stocks, you can trust STER through difficult circumstances.
Also, Sterling prints a three-year revenue growth rate of 15.3%, above nearly 66% of its peers. And priced at only 15.04X free cash flow (FCF), STER is also undervalued. Analysts rate STER a moderate buy with a $15.60 price target, implying 16% upside. Not bad for one of the stable stocks.
Coterra Energy (CTRA)
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Headquartered in Houston, Texas, Coterra Energy (NYSE:CTRA) primarily focuses on hydrocarbon exploration (upstream). Interestingly, the energy sector doesn’t usually offer candidates for low-volatility stocks based on the underlying pricing fluctuations. However, CTRA distinguishes itself from the competition with a 60-month beta of only 0.3. Keep in mind that a beta of 1 implies volatility that tracks the benchmark equities index.
Fundamentally, Coterra should be on your radar as one of the boring safe stocks that still commands upside potential. Right now, because the labor market is running at full steam, more dollars will chase after fewer goods. That’s inflationary for key commodities, which obviously include energy-related products.
Financially, Coterra benefits from a solid balance sheet and excellent top-line expansion. Even with these and other positive stats, CTRA still trades at a trailing earnings multiple of 7.09X, lower than the sector median of 8.67x. Lastly, analysts peg CTRA as a moderate buy with a $33 target, implying over 17% growth.
Biogen (BIIB)
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Based in Cambridge, Massachusetts, Biogen (NASDAQ:BIIB) is a multinational biotechnology firm. Per its public profile, Biogen specializes in the discovery, development, and delivery of therapies for the treatment of neurological diseases to patients worldwide. Typically, the biotech space isn’t the most ideal hunting ground for low-volatility stocks. However, Biogen stands out thanks to its 60-month beta of 0.14.
Of course, the other side of this coin is that investors shouldn’t look to BIIB to facilitate cryptocurrency-like returns. Over the past 365 days, BIIB returned only about 4%. As I said, it’s one of the safe stocks to buy, not one of the investments that will make you rich.
Nevertheless, moving forward in these murky waters, the benefit to BIIB stakeholders is predictability. Commanding a net margin of 26.72% (above nearly 93% of its peers), Biogen is consistently profitable. Even so, BIIB trades for only 14.38X trailing earnings, favorably below 72.85% of the drug manufacturing industry. Analysts rate BIIB a moderate buy with a $325.91 target, implying over 23% upside potential.
Palomar (PLMR)
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A specialty insurance company, Palomar (NASDAQ:PLMR) offers an enticing case for low-volatility stocks; well, as enticing as you can get in this space. Providing insurance coverage for events such as earthquakes, hurricanes, floods, and other perils, Palomar protects its clients from financial devastation. Thankfully, though, earthquakes and similar disasters don’t happen every day. Thus, PLMR unsurprisingly sports an ultra-low 60-month beta of 0.09.
To be fair, such a beta doesn’t mean that PLMR is immune from red ink. In the trailing year, it lost 45% of its equity value. Still, since the January opener, PLMR has stabilized significantly. Part of that likely stems from the predictability of its business. No matter what, people and businesses need insurance against the unknown. Thus, it’s not shocking to see Palomar post a three-year revenue growth rate of 34.7%.
Another factor that makes PLMR one of the stable stocks to buy is its profit margins. With a net margin of 16.6%, the company beats out 83% of its rivals. Analysts peg PLMR as a moderate buy with a $63.40 target, implying nearly 25% growth.
ZTO Express (ZTO)
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As a China-based logistics firm, ZTO Express (NYSE:ZTO) might not seem an ideal candidate for low-volatility stocks. After all, the benchmark China-focused exchange-traded fund iShares China Large-Cap ETF (NYSEARCA:FXI) is down double digits since the beginning of the year. In sharp contrast, the U.S. benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is up double digits during the same frame.
Still, what makes ZTO intriguing as one of the potential safe stocks to buy is its reliability. Judging by the data, ZTO features a 60-month beta of 0.07. Fundamentally, the company obviously is exposed to Chinese consumer sentiment. Still, it provides shipping and delivery services to Alibaba (NYSE:BABA), an enterprise that commands extraordinary respect.
Also, ZTO probably isn’t going anywhere. For example, it has a solid balance sheet, backed by a cash-to-debt ratio of 1.08X. That’s above 68.58% of its rivals in the transportation industry. Notably, ZTO carries a unanimous strong buy rating among six experts. Plus, the price target lands at $34.12, implying almost 40% upside.
Full Truck Alliance (YMM)
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A leading digital freight platform in China, Full Truck Alliance (NYSE:YMM) also suffers from skepticism. With the Chinese economy showing signs of cracking under stress, YMM might not seem a wise investment; at least, not when the framework is for stable stocks to buy. Nevertheless, the data suggests that not only is YMM stable but could also provide significant returns.
For one thing, YMM carries a 60-month beta of only 0.19. And for what it’s worth, a consensus of technical indicators suggests that Full Truck is a buy. Yes, YMM did lose over 19% of equity value since the January opener. However, in the trailing year, it’s up more than 15%.
Another consideration for low-volatility stocks centers on Full Truck’s financials. Impressively, it carries a cash-to-debt ratio of 405.61x, thus enjoying flexibility. Also, YMM is undervalued, trading at only 15.72x forward earnings. Finally, analysts rate shares a moderate buy with a $10.14 target, implying 43% growth.
A-Mark Precious Metals (AMRK)
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Headquartered in El Segundo, California, A-Mark Precious Metals (NASDAQ:AMRK) is a precious metals trading company. Per its public profile, A-Mark represented the first corporate enterprise allowed to make and sell coins from the metals recovered in the shipwreck of SS Gairsoppa. Still, A-Mark seems to run against conventional wisdom regarding low-volatility stocks.
Basically, precious metals – being commodities – tend to swing higher during inflationary cycles. One of the selling points of gold is to hedge against the devaluation of the dollar. However, with the Fed potentially raising rates again, that doesn’t seem helpful to AMRK. Not surprisingly, in the trailing month, AMRK lost nearly 19% of its equity value.
Nevertheless, AMRK’s 60-month beta sits at 0.07. More importantly, it’s possible that the precious metals could move on the fear trade; that is, concerns about pressing instability tied to the post-pandemic troubles. Granted, A-Mark is risky, I won’t deny that. However, analysts also peg shares as a unanimous strong buy with a $53.67 target, implying 87% upside.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
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