Buy These 4 Low-Beta Stocks to Counter Market Volatility
Analysts express worry that an extended period of tight monetary policy, lasting longer than initially anticipated, could potentially steer the economy into a recession. Hence, the market will remain volatile, calling for an urgency to create a portfolio of low-beta stocks as the securities will deliver healthy returns and shield against choppy market conditions.
In this regard, stocks like J&J Snack Foods Corp. JJSF, Erie Indemnity Company ERIE, RenaissanceRe Holdings Ltd. RNR and Huron HURN are worth betting on.
Understanding Beta
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.
Screening Criteria:
We have taken a 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 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 of seven stocks that qualified for the screening:
J&J Snack Foods is a well-known name in the snack food industry. J&J Snack has continued to deliver profit momentum across all its business segments, thanks to the strategic initiatives that the company has undertaken over the past two years.
Erie Indemnity has witnessed a rise in management fee revenue from policy issuance and renewal services. Increasing administrative services reimbursement revenue is also aiding Erie Indemnity. Also, compared to the composite stocks belonging to the industry, the company has a much stronger balance sheet.
Strong underwriting income and record fee and net investment income have been aiding RenaissanceRe Holdings – a leading provider of reinsurance and insurance across the globe. Amid a favorable reinsurance market, RenaissanceRe Holdings believes it will get large and diversified business once it closes the acquisition of Validus Re.
Huron is being aided by solid organic growth in each of its operating segments. The top line of the global professional services firm is continually being favored by rising demand for consulting and managed services and digital capabilities.
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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RenaissanceRe Holdings Ltd. (RNR) : Free Stock Analysis Report
Huron Consulting Group Inc. (HURN) : Free Stock Analysis Report
Erie Indemnity Company (ERIE) : Free Stock Analysis Report
J & J Snack Foods Corp. (JJSF) : Free Stock Analysis Report
