Buy 5 Low-Beta Stocks & Get Rid Of Market Volatility

The investment world believes in the idea that for getting lucrative returns, investments in risky securities are essential. The idea works well when the market is bullish but the converse scenario should also be taken into account.

Following intense research, we have developed a strategy that low-risk stocks could also lead to handsome returns if some other specific criteria are considered.

Meaning of Beta

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.

The Winning Strategy

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 15 stocks that fit the bill:

Operations of Pilgrim's Pride Corporation (NASDAQ:PPC) — headquartered in Greeley, CO — include production and distribution of frozen chicken products in the United States. For 2017, we are expecting the company to witness year-over-year earnings improvement of more than 38%. Also, the Zacks Consensus Estimate of earnings for 2017 has been revised upward over the last 30 days.

Headquartered in Springdale, AR, Tyson Foods Inc. (NYSE:TSN) is the biggest U.S. company that produces, distributes and markets chicken, beef, pork as well as prepared foods. For the fiscal year ended September 2017, the company’s earnings will likely grow almost 16%. On top of that, over the past 30 days, Tyson Foods’ full-year earnings estimates have been revised upward.

Central Garden & Pet Company (NASDAQ:CENT) — based in Walnut Creek, CA — is a leading producer and marketer of premium and value-oriented products focused toward the lawn & garden and pet supplies markets in the United States. The company managed to beat the Zacks Consensus Estimate for earnings over the last four quarters with an average positive surprise of 122.17%. Also, for the fiscal year ended September 2017, Central Garden’s earnings are expected to grow almost 20%.

Headquartered in Beijing TAL Education Group (NYSE:TAL) is the provider of services related to tutoring for students in the People's Republic of China. The Zacks Consensus Estimate for earnings for fiscal year ended February 2018 has been revised upward over the past 30 days. Also, for the fiscal year, we are expecting the company to witness 56.4% year-over-year earnings improvement.

Mercury General Corporation (NYSE:MCY) — headquartered in Los Angeles, CA — is involved in activities like writing risk statements of automobile insurance. The company surpassed the Zacks Consensus Estimate in three of the last four quarters with an average positive earnings surprise of 1.06%.

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.

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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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