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Buy 5 Low-Beta Stocks to Stay Safe in Volatile Market

Nalak Das

Wall Street rally came to an abrupt halt on Mar 4 owing to concerns regarding global economic slowdown. Notably, the Dow lost 206.67 points in an extremely choppy session. The blue-chip index fell below key technical support line 26,000. Similarly, the S&P 500 declined 11.07 and closed below 2,800 - a key technical barrier. The tech-heavy Nasdaq Composite also shed 17.79 points.

Investors remained alarmed primarily on account of slowdown in the growth rate of China, Japan and Eurozone. Latest economic US economic data also raised some eyebrows. Apprehensions regarding an impending economic slowdown are likely to result in more volatile trading. At this juncture, it will be prudent to invest in in low-beta stocks with favorable Zacks Rank to keep one’s portfolio safe from day-to-day market fluctuations. 

China Trims 2019 Growth Forecast

On Mar 4, Chinese Premier Li Keqiang’s annual work report presented to the National People’s Congress pegged the country’s growth rate in the range of 6 - 6.5% in 2019. Notably, China’s growth rate in 2018 was 6.6%, its lowest growth rate since 1990.

Economists surveyed by Bloomberg pegged China’s economic growth at 6.2% in 2019. China is providing several stimuli to accelerate its economic growth. In addition to making provisions for easy credit, the government has decided to cut tax by 3% for top VAT bracketed products. Despite these initiatives, the economy seems softening.

Japan’s Economy to Remain Stagnant

Last month, Bank of Japan estimated that the country will grow at 0.9% in 2019 and the growth rate will slow down further to 0.5% in 2020. On Feb 21, Bloomberg reported that the Flash Markit/Nikkei Japan Manufacturing PMI fell to a seasonally adjusted 48.5 in February from 50.3 in January, its lowest reading since June 2016.

On Feb 20, Japan stated that its trade deficit for the month of January increased a whopping 49.2% year over year to 1.41 trillion yen. The stiff increase in trade deficit was owing to a decline of 17.4% of exports to China, its largest decline since January 2016.

Eurozone’s Growth at Risk

On Feb 6, the European Commission (EC) lowered 2019 growth projection for the 19-member Eurozone from 1.9% in November to 1.3%. The growth rate for 2020 was pegged at 1.6%. The primary reason behind sluggish growth rate is a massive slowdown in Germany – the largest economy of Eurozone. The EC reduced Germany’s growth rate in 2019 to 1.1% from its earlier projection of 1.9%.

On Feb 4, Bank of England reduced growth rate of the U.K. for 2019 to 1.2% from 1.7% forecasted earlier. Economic forecast for 2020 has been reduced to 1.5%. The root cause of an impending slowdown is the Brexit related problem.

Softness in US Economic Data

The Institute of Supply Management manufacturing index for February came in at 54.2 from 56.6 in January. The figure was also below the consensus estimate of 55.8. February’s reading was the lowest since November 2016. A decline in new orders, production, employment and prices resulted in overall fall of the index.

On Mar 1, the Department of Commerce reported that personal income decreased by 0.1% in January sharply in contrast to an increase of 0.1% in December. The consensus estimate was for growth of 0.4%. This was the first decline of personal income since November 2015. Notably, disposable personal income declined 0.2% in January. 

Our Top Picks

At this stage, investment in low-beta stocks will be fruitful. The beta is equal to 1 which means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1. However, picking winning stocks can be a difficult task.

This is where our VGM Score comes in handy, which helps us to select winners. We narrowed down our search on five stocks. Each of these stock have a Zacks Rank #1 (Strong Buy) and a VGM Score A. You can see the complete list of today’s Zacks #1 Rank stocks here.

Great Lakes Dredge & Dock Corp. GLDD is the largest provider of dredging services in the United States and internationally. It has a beta of 0.62. It has expected earnings growth of 170.6% for current year. The Zacks Consensus Estimate for the current year has improved by 2.2% over the last 60 days.

Deckers Outdoor Corp. DECK designs, markets, and distributes footwear, apparel, and accessories for casual lifestyle use and high performance activities. It has a beta of 0.63. It has expected earnings growth of 38.3% for current year. The Zacks Consensus Estimate for the current year has improved by 16.4% over the last 60 days.

Rio Tinto plc RIO explores, develops, produces, and processes minerals and metals worldwide. It has a beta of 0.78. It has expected earnings growth of 28.4% for current year. The Zacks Consensus Estimate for the current year has improved by 43.4% over the last 60 days.

Anthem Inc. ANTM operates as a health benefits company in the United States. It has a beta of 0.95. It has expected earnings growth of 20.4% for current year. The Zacks Consensus Estimate for the current year has improved by 8.8% over the last 60 days.

Shoe Carnival Inc. SCVL operates as a family footwear retailer in the United States. It has a beta of 0.62. It has expected earnings growth of 10.3% for current year. The Zacks Consensus Estimate for the current year has improved by 1.5% over the last 60 days.

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