Wall Street is grappling with renewed worries as the broader market has slipped into debt ceiling uncertainties. This is creating fears and hence will continue to make the market volatile. Thus, forming a portfolio of low-beta stocks is of utmost importance since the securities will deliver healthy returns and shield against choppy market conditions.
In this regard, stocks like Penumbra Inc PEN, Lamb Weston Holdings, Inc. LW, Transportadora de Gas del Sur SA TGS and AeroVironment Inc. AVAV are worth betting on.
Beta measures the volatility or risk of a particular asset compared to the market. In other words, beta measures the extent of a security’s price movement relative to the market. In this article, we are considering the S&P 500 as the market.
If a stock has a beta of 1, then the price of the stock will move with the market. So, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.
For example, if the market offers a return of 20%, a stock with a beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20%, the stock will sink 60%, which is devastating.
We have taken beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. However, this should not be the only factor to be considered while selecting a winning strategy. We need to take into account other parameters as well that can add value to the portfolio.
Percentage Change in Price in the Last 4 Weeks Greater Than Zero: This ensures that the stocks saw positive price movement over the last 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 four stocks among 12 that qualified for the screening:
Penumbra, headquartered in Alameda, CA, is among the leading healthcare players focusing on innovative therapies. Penumbra, having a global presence, primarily addresses challenging medical conditions through its broad portfolio of novel products.
Lamb Weston Holdings is a well-known supplier of sweet potato, frozen potato, vegetable products and appetizers. Lamb Weston supplies these products to retailers and restaurants across the globe and thereby secures steady cashflows.
Transportadora de Gas del Sur SA’s midstream asset portfolio has the most extensive natural gas pipeline network in Latin America. It generates stable fee-based revenues since its pipeline assets transport more than 60% of the gas consumed in Argentina.
Transportadora de Gas del Sur has witnessed upward estimate revisions for its 2023 bottom line in the past 30 days. The upward revisions are backed by its stable business model and a strong focus on creating differential shareholder value. Also, the firm has lower debt exposure than the composite stocks belonging to the industry.
Headquartered in Simi Valley, CA, AeroVironment is a well-known name in manufacturing unmanned aircraft systems and tactical missile systems. For fiscal 2024, the stock is likely to see earnings growth of 94.5%.
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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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