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Buy 5 Low-Beta Stocks to Counter Market Volatility

Nalak Das
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Buy 5 Low-Beta Stocks to Counter Market Volatility

The broad-based collapse in U.S. stock markets can be attributed to investors' apprehensions regarding soaring yields, lingering trade-conflict with China and several geopolitical crises.

The month of October has been one of the worst for Wall Street since March. All three major stock indexes are down at least 4.7% in October so far. The broad-based collapse in U.S. stock markets can be attributed to investors’ apprehensions regarding soaring yields, lingering trade-conflict with China and several geopolitical crises.

The situation is likely to intensify in the near term with mid-term Congressional elections less than two weeks away and the Federal Reserve signaling one more rate hike this year. 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.  

Yields Spike, Trade Conflicts Persist

The yields on 10-year U.S. Treasury Note, 30-year U.S. Treasury Note and 2-year U.S. Treasury Notes, are currently hovering around their historic high levels. Higher interest rate will raise the cost of funds of investing in risky assets like equities. Meanwhile, the Fed chair Jerome Powell has given indications of a fourth rate hike in 2018.  

Meanwhile, trade-related conflicts between the United States and China are showing no signs of abating. The U.S. government has already imposed $250 billion of tariffs on Chinese goods while China retaliated with $110 billion tariffs on U.S. exports. Notably, President Trump has threatened China with the imposition of another $267 billion of tariffs if the situation worsens further.

Geopolitical Crises Worsen

Political tensions between the United States and one of its close allies Saudi Arabia has intensified since last week following the killing of the U.S.-based journalist Jamal Khashoggi inside the Saudi consulate at Istanbul. President Trump has termed the Saudi government’s response as "the worst cover-up ever". Meanwhile, Saudi Arabia has warned against any possible sanction by the United States on the country.

In Europe, political turmoil in the UK related to its proposed departure from the European Union is showing no signs of fading. Meanwhile, the government of Italy is in conflicts with the European Union regarding its fiscal plan of higher borrowings.

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.

The chart below shows price performance of our five picks year to date.

Rent-A-Center Inc. RCII leases household durable goods to customers on a rent-to-own basis in the United States. It has a beta of 0.58. The company has expected earnings growth of 238.9% for current year. The Zacks Consensus Estimate for the current year has improved by 21% over the last 60 days.

Guess', Inc. GES design, market, distribute and license one of the world's leading lifestyle collections of contemporary apparel and accessories for men, women and children. It has a beta of 0.15. The company has expected earnings growth of 48.6% for current year. The Zacks Consensus Estimate for the current year has improved by 3% over the last 60 days.

Core-Mark Holding Co. Inc. CORE is one of the largest marketers of fresh and broad-line supply solutions to the convenience retail industry in North America. It has a beta of 0.86. The company has expected earnings growth of 28% for current year. The Zacks Consensus Estimate for the current year has improved by 4.9% over the last 60 days.

DSW Inc. DSW is a leading branded footwear and accessories retailer operating 514 stores in 43 states, the District of Columbia and Puerto Rico. It has a beta of 0.88. The company has expected earnings growth of 13.8% for current year. The Zacks Consensus Estimate for the current year has improved by 6.8% over the last 60 days.

The Marcus Corp. MCS engages in the lodging and entertainment industries. It operates through two segments: Movie Theatres, and Hotels and Resorts. It has a beta of 0.48. The company has expected earnings growth of 18.2% for current year. The Zacks Consensus Estimate for the current year has improved by 3.4% over the last 60 days.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>