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Wall Street Hit by Resurgent Volatility: 5 Ultra-Safe Picks

Since multiple tensions are drastically denting investor confidence, picking stocks with low beta looks like a smart option at this point.

U.S. stocks moved lower once again on Oct 22 as multiple fears led to another session of volatile trading. Energy and financials declined with banks in particular suffering significantly following concerns over loan growth.

These fears in turn were a product of concern over the recent spike in rates. Worries over global growth and geopolitical tensions also continued to bother investors. Overall, October continues to live up to its historical reputation for heightened volatility.

Since these events could drastically dent investor confidence, picking stocks with low beta looks like a smart option at this point. Beta measures the tendency of a stock's returns to respond to market swings. Low correlation stocks provide protection during turbulent times as they are less prone to day-to-day fluctuations.

Rate Spike, Trade Worries Raise Volatility

On Oct 22, the behavior of major indexes made it quite clear that volatility has returned to spook the bourses. The Dow closed 0.5% lower after gaining 117 points within the first few minutes of trading. The S&P 500 lost 0.4% and only the Nasdaq ended 0.3% higher. These moves were in keeping with the current levels of the Cboe Volatility Index.

The VIX, also referred to as the markets’ fear gauge, is currently hovering around 19.64, which is close to its historical average. This follows a week-long period when it was trading well below its statistical average. A spike in Treasury yields, which continue to trade at multi-year highs are one of the major reasons worrying investors at this point.

Another factor troubling markets are global growth worries. Trade tensions have started to affect China’s economy, resulting in below-par GDP levels and an equity market rout. Chinese authorities have promised also necessary support leading to resurgence in the country’s stocks. But concerns over China’s economic fortunes refuse to fade away.  

 

Geopolitical Tensions, Italian Budget Add to Worries

Meanwhile, fresh tensions between the United States and Saudi Arabia over the disappearance of journalist Jamal Khashoggi are also weighing on investors. On Oct 19, Treasury Secretary Steven Mnuchin said he has decided to pull out of an investment conference in Riyadh.

Several other high-profile names have withdrawn from the meeting, dubbed “Davos in the desert”, following the Khashoggi incident. Meanwhile, Italy’s newly elected government approved its first budget last week. Per these proposals, the country’s fiscal deficit is projected to increase to 2.4% of GDP in 2019.

The EU has vehemently objected to these budgetary proposals. This is because the currency union’s rules stipulate that deficits should not exceed 3% of GDP. While the budget plan hasn’t crossed this limit, it is likely to boost debt levels. Consequently, ECB boss Mario Draghi, cautioned that one of the potential risks for the Eurozone’s economy was countries trying to circumvent EU budget rules.

Our Choices

October is living up to its historical reputation for volatility, with a number of concerns driving stocks lower. Rate spike fears and the fallout of trade tensions have been weighing on investor sentiment for some time. Now, geopolitical tensions and worries about Italy’s concerns have added to market fears.

In such an event, it would be best to add some safe bets to your portfolio in order to shore up gains. This is why it makes good sense to pick value stocks with low beta, which could protect gains made recently. Our selection is also backed by a Zacks Rank #1 (Strong Buy) and other relevant metrics. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alliance Resource Partners, L.P. ARLP is a diversified producer and marketer of coal to major U.S. utilities and industrial users.

Alliance Resource Partners has a beta value of 0.79 and a dividend yield of 10.5%. The company has expected earnings growth of 16.1% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.1% over the last 30 days.

Ennis, Inc. EBF is one of the largest private-label printed business product suppliers in the United States.

Ennis has a beta value of 0.67 and a dividend yield of 4.7%. The company has expected earnings growth of 8.5% for the current year. The Zacks Consensus Estimate for the current year has improved by 12% over the last 30 days.

Eni SpA-ADR E is among the leading integrated energy players in the world.

Eni SpA has a beta value of 0.81 and a dividend yield of 3.9%. The company has expected earnings growth of 99.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 12% over the last 30 days.

Cadence Bancorporation CADE is a regional bank holding company. It provides corporations, middle-market companies, small businesses and consumers banking and financial solutions.

Cadence has a beta value of 0.53 and a dividend yield of 2.7%. The company has expected earnings growth of 36.1% for the current year. The Zacks Consensus Estimate for the current year has improved by 0.6% over the last 30 days.

Cincinnati Financial Corporation CINF markets property and casualty insurance as its main business.

Cincinnati Financial has a beta value of 0.83 and a dividend yield of 2.8%. The company has expected earnings growth of 17.3% for the current year. The Zacks Consensus Estimate for the current year has improved by 2% over the last 30 days.

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Alliance Resource Partners, L.P. (ARLP) : Free Stock Analysis Report
 
Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report
 
Eni SpA (E) : Free Stock Analysis Report
 
Ennis, Inc. (EBF) : Free Stock Analysis Report
 
Cadence Bancorp (CADE) : Free Stock Analysis Report
 
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