Low Beta, High Performance: 3 Stocks to Watch
Beta: A Volatility Measuring Tool
In the context of Wall Street, beta is a gauge of a stock’s movement or volatility compared to the general market – typically the S&P 500 Index. Beta measures the magnitude to which a stock fluctuates versus the fluctuations of the major market indices.
How does it work?
A beta of 1.0 means that a stock hypothetically has the same magnitude of movement as the overall market. A beta higher than 1.0 means the stock is more volatile than the market. For example, a beta of 1.20 would suggest that the underlying equity moves about 20% more than the S&P 500 Index. Examples of high beta stocks include Credo Tech CRDO and GameStop Corp GME – which regularly see moves of 10% or more in each direction.
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Generally, low beta stocks can be optimal for investors because they provide less wild swings, and ultimately less risk – all else being equal. On the contrary, some degree of beta is needed within a portfolio to achieve higher returns. Remember, no risk, no returns. Another example of a high beta stock would be Tesla TSLA. Tesla has a beta of 1.74, meaning it tends to move 74% more than the market.
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As an investor, it is best to find the mix that works for you best. There is no “one size fits all” solution, and often the best portfolios have a mix between both high and low beta stocks. Through this counterbalance, investors can benefit by outperforming on up days, but also surviving downswings in the major indices.
3 Low Beta Stocks to Consider
1. Zacks #1 Rank (Strong Buy) stock Hershey HSY has much going for it. North America’s largest chocolate maker is not only trading steady; the stock is nearing new highs amidst a volatile market. Over the past year, Hershey is higher by 21.10% versus -5% returns in the S&P 500 Index.
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Hershey has more attributes than strong price performance and a low beta. HSY pays a juicy 1.72% dividend, has strong earnings expectations moving forward, and has smashed earnings estimates for eleven straight quarters.
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2. Yum China YUMC holds a Zacks Rank of 2 (Buy). The company owns and franchises restaurants in China, such as KFC, Pizza Hut, and Taco Bell. Yum China is the definition of a steady performer. Despite strict lockdowns and a volatile Chinese equity market, the stock has been a serial steady outperformer. For example, yesterday, when many Chinese stocks got crushed, YUMC was flat.
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Investors should continue to ride the stock as long as it stays above its 50-day moving average.
3. Zacks Rank # 3 Box Inc BOX is a cloud-based software platform operator. Box grew EPS at a 41% clip last quarter and while most software stocks are in the gutter, BOX is approaching new all-time highs and is showing relative strength. Unlike the previous two stocks we mentioned above, Box offers investors in search of low beta a high-growth tech option.
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Box is set to report earnings on March 3rd, and investors should expect a big break out should earnings beat expectations.
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Hershey Company (The) (HSY) : Free Stock Analysis Report
GameStop Corp. (GME) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Box, Inc. (BOX) : Free Stock Analysis Report
Yum China (YUMC) : Free Stock Analysis Report
Credo Technology Group Holding Ltd. (CRDO) : Free Stock Analysis Report
