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Fend Off Market Volatility With These 5 Low-Beta Stocks

Nilanjan Banerjee

Risky securities perform well only when the market is bullish. However, such stocks might fail to reward investors handsomely in bearish market conditions.

Hence, with fears of recession rising in recent months, it would be ideal for investors to pick from low-beta stocks that could also generate lucrative returns.

Meaning of Beta

Beta indicates the volatility of a particular stock with respect to the market. In other words, beta measures the extent of stock price movement relative to the market (we are considering S&P 500 here).

If a company has a beta of 1, it means that the relative volatility of the stock is the same as that of the S&P 500. In the same way, if the stock’s beta is greater than 1 then it is more volatile compared to the market. Conversely, a beta below 1 signifies less volatility.

Now, if a portfolio’s beta is 3, it is three times more volatile than the market. Hence, if the market is projected to give 20% return, the portfolio will then definitely contribute 60% return which is amazing.

However, the opposite case also holds true. If the market slips 20% then the portfolio return plummets 60% which is surely a matter of concern.

The Winning Strategy

In our screening criteria we included beta in the range of 0 to 0.6 for short listing low risk stocks. But this can’t be the only criterion for betting on stocks. The other parameters that need to be added to create a winning portfolio are:

Percentage Change in Price in the Last 4 Weeks greater than zero: This ensures that the stocks saw positive price movement over the last one 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 five of the 12 stocks that qualified the screening:

Headquartered in Los Angeles, CA, Guess?, Inc. GES is a global operator of retail stores, which is primarily involved in designing and distributing a wide variety of apparel, watches and other consumer products. In fiscal year 2020 and 2021, the stock is likely to witness earnings growth of roughly 38% and 25%, respectively. 

Cedar Fair Entertainment Company FUN, headquartered in Sandusky, OH, is a leading operator of amusement resorts. For 2019 and 2020, the stock is likely to see earnings growth of 12.6% and 6%, respectively.

Aaron's, Inc. AAN, headquartered in Atlanta, GA, primarily offers solutions related to omnichannel lease purchases. The company is likely to see earnings growth of 18% through 2019. The Zacks Consensus Estimate for the company’s 2019 earnings per share has also been revised upward over the past 60 days.

Headquartered in Oak Brook, IL, Great Lakes Dredge & Dock Corporation GLDD is primarily engaged in providing services related to dredging. For 2019 and 2020, the company is likely to see earnings growth of 335.3% and 8.1%, respectively.

PennyMac Financial Services, Inc. PFSI, headquartered in Westlake Village, CA, is a leading financial services firm that includes originating and servicing mortgages. The stock is likely to see earnings growth of 51.4% and 6.6%, respectively.  

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.

Click here to sign up for a free trial to the Research Wizard today.

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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Great Lakes Dredge & Dock Corporation (GLDD) : Free Stock Analysis Report
 
Aaron's, Inc. (AAN) : Free Stock Analysis Report
 
PennyMac Financial Services, Inc. (PFSI) : Free Stock Analysis Report
 
Cedar Fair, L.P. (FUN) : Free Stock Analysis Report
 
Guess?, Inc. (GES) : Free Stock Analysis Report
 
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