Behind a successful investor is a lot of homework. There is no thumb rule that for getting lucrative returns, one should invest in risky stocks although the strategy works well when the market is bullish.
We have created an investment strategy which proves that less-risky stocks could also give handsome returns if some parameters are taken into account.
Beta measures the volatility or risks to a security relative to the market (we are considering the S&P 500 here). That is, beta measures the extent to which the price of a stock moves with respect to the market.
If the beta is equal to 1 it 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.
For example, if the beta is 1.8 then the stock will witness 80% more movement than the market. Hence, we can say that if the market goes up, the stock will outperform by 80%. Conversely, if the market plunges, the stock will lose much more value than the market.
Building a Low-Risk Portfolio
In order to find stocks with lower-than-market volatility, we added beta between 0 and 0.6 as our main criterion for screening. However, we need to keep in mind that low beta is not the only metric to be considered for choosing stocks in a volatile market. Hence to reach the winning strategy, we have considered a few additional criteria.
Percentage Change in Price in the last 4 Weeks: We considered those stocks that saw positive price movement over the last month.
Average 20 Day Volume greater than or equal to 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.
Here are five of the 18 stocks that fit the bill:
Headquartered in Niwot, CO, Crocs CROX is involved in designing casual footwear for men, women and children. The company beat the Zacks Consensus Estimate for earnings in three of the last four quarters with an average positive surprise of 83.89%. Also, the company’s earnings for 2017 will likely grow 92.6%.
Guess?, Inc. GES, headquartered in Los Angeles, CA, is the designer and supplier of casual apparel and accessories for men, women and children. The company delivered an average positive earnings surprise of 20.57% for the last four quarters. Also, the firm’s earnings for fiscal year 2018 is expected to grow by 31.1%.
Headquartered in Portland, OR,Craft Brew Alliance BREW is the leading seller of craft beers in the United States. For 2017, the company’s earnings will likely grow 350%. Also, Craft Brew surpassed the Zacks Consensus Estimate for earnings in two of the last four quarters, with an average positive surprise of 222.74%.
Founded in 1889 and based in Sparks, MD, McCormick & Company MKC is a leading marketer of spices, seasonings, specialty foods and flavors to the entire food industry across the globe. The company delivered an average positive earnings surprise of 3.97% for the last four quarters.
Headquartered in Greeley, CO, Pilgrim's Pride Corporation PPC primarily processes and supplies fresh and frozen chicken products. For 2017, we are expecting the company to witness year-over-year earnings growth of more than 47%. The Zacks Consensus Estimate for earnings in 2017 has been revised upward over the last 60 days.
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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Craft Brew Alliance, Inc. (BREW) : Free Stock Analysis Report
Pilgrim's Pride Corporation (PPC) : Free Stock Analysis Report
McCormick & Company, Incorporated (MKC) : Free Stock Analysis Report
Guess?, Inc. (GES) : Free Stock Analysis Report
Crocs, Inc. (CROX) : Free Stock Analysis Report
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