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Tackle Market Volatility With These 5 Low-Beta Stocks

Nilanjan Banerjee

Most investors believe that only risky stocks generate high returns. However, the strategy works only when the market is bullish.

Many strategies assure handsome returns for risk-averse investors. We have created one with low-beta stocks after considering several other parameters.

Beta Understanding

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 12 stocks that fit the bill:

Headquartered in Plano, TX, Rent-A-Center, Inc. RCII is primarily engaged in leasing household products to clients. The company surpassed the Zacks Consensus Estimate in each of the last four quarters, the average positive earnings surprise being 74%. Through 2019 and 2020, the stock is likely to see earnings growth of 100% and 15%, respectively.

Aaron's Inc. AAN, headquartered in Atlanta, GA, is mainly involved in offering solutions associated to lease-purchase with an omnichannel approach. The company posted an average positive earnings surprise of 4.4%. Through 2019, the stock is likely to see earnings growth of 14%.

Headquartered in Ankeny, IA, Casey's General Stores Inc CASY is primarily involved in operating convenience stores. The company beat the Zacks Consensus Estimate in all the prior four quarters. For fiscal 2020 and 2021, the stock is expected to see earnings growth of 5.6% and 6.3%, respectively.

Magellan Health, Inc. MGLN, headquartered in Scottsdale, AZ, is mainly engaged in offering services related to healthcare management. Through 2019 and 2020, the stock is likely to witness earnings growth of 59.4% and 27%, respectively.

Based in Sioux Falls, South Dakota, NorthWestern Corporation NWE is primarily involved in providing natural gas and electricity to clients. The stock beat the Zacks Consensus Estimate in three of the past four quarters.

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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NorthWestern Corporation (NWE) : Free Stock Analysis Report
 
Aaron's, Inc. (AAN) : Free Stock Analysis Report
 
Rent-A-Center, Inc. (RCII) : Free Stock Analysis Report
 
Magellan Health, Inc. (MGLN) : Free Stock Analysis Report
 
Caseys General Stores, Inc. (CASY) : Free Stock Analysis Report
 
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