Buy These 4 Low-Beta Stocks to Combat Market Volatility
Broad inflationary pressures are increasing, raising fears that the Federal Reserve will continue to hike rates aggressively. This is raising concerns about a possible recession, inducing volatility as reflected by significant gains and losses in the market.
Hence, creating a portfolio of low-beta stocks is of utmost importance since the securities will deliver healthy returns and shield against volatile market conditions. In this regard, stocks like Scorpio Tankers Inc. STNG, AMN Healthcare Services, Inc. AMN, Ardmore Shipping Corporation ASC and Lancaster Colony Corporation LANC are worth betting on.
Beta Understanding
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 beta between 0 and 0.5 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 eight that qualified the screening:
Scorpio Tankers is expected to generate significant cashflows since the company is the largest product tanker owner in the world. It has a diversified blue-chip customer base, providing services related to the marine transportation of refined petroleum products. For 2022, STNG is likely to see earnings growth of 328.1%.
Ardmore Shipping’s outlook seems bright since the company has set a core strategy of developing a modern, high-quality fleet of products and chemical tankers. The company focuses on building good commercial relationships for the long term. For 2022, ASC will likely see earnings growth of 370.3%.
Lancaster is a well-known name in the manufacturing and marketing of specialty food products. To counter the inflationary pressure, it resorted to continued pricing actions to boost net sales. LANC is benefiting from the handsome demand for frozen garlic bread and frozen dinner rolls.
AMN Healthcare Services, a leader in total talent solutions for healthcare organizations, has been pleasing shareholders by repurchasing 6.8 million shares since 2016. The portfolio of the company’s diversified solutions is in great demand as healthcare organizations are still facing a massive shortage of labor. In the past 30 days, AMN Healthcare has witnessed upward earnings estimate revisions for 2022 earnings.
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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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AMN Healthcare Services Inc (AMN) : Free Stock Analysis Report
Ardmore Shipping Corporation (ASC) : Free Stock Analysis Report
Lancaster Colony Corporation (LANC) : Free Stock Analysis Report
Scorpio Tankers Inc. (STNG) : Free Stock Analysis Report
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