Hate Market Volatility? Buy These 5 Low-Beta Stocks

Proper research and analysis is the key to success when it comes to making investments. There is no thumb rule that lucrative returns can come only by investing in risky securities. It is true that risky stocks generate returns higher than the market when the market walks on the bullish path. However, the converse scenario should also be taken into account.

In this article, we have created a strategy to build a portfolio of less risky stocks that could also lead to impressive yields. In other words, investing in securities having low beta is a great way to avoid market volatility.

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.

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 15 stocks that fit the bill:

Based in Nelsonville, OH, Rocky Brands Inc. (NASDAQ:RCKY) is well known for designing and manufacturing premium quality footwear. For the current year, the company is expected to witness 1,050% year-over-year earnings growth. Moreover, over the last 30 days, the current year Zacks Consensus Estimate for earnings has been revised upward.

Compañía Cervecerías Unidas SA (NYSE:CCU) is a leading beverage firm having diversified businesses. The company will likely see 11.6% year-over-year growth in earnings for the current year. On top of that, the current year Zacks Consensus Estimate for earnings has been revised upward over the last 30 days.

Headquartered in Milwaukee, WI The Marcus Corporation (NYSE:MCS) is the owner and operator of movie theatres, hotels and resorts. The company surpassed the Zacks Consensus Estimate in each of the prior four quarters with an average positive earnings surprise of 15.38%. Moreover, for the current year, The Marcus will likely experience 21.3% earnings growth year over year.

Aaron's Inc. (NYSE:AAN) – headquartered in Atlanta – has operations that include specialty retailing of furniture, consumer electronics and home appliances. The company managed to beat the Zacks Consensus Estimate of earnings in each of the previous four quarters, with an average positive surprise of 10.55%.

Headquartered in Houston, TX KMG Chemicals Inc. (NYSE:KMG) is the manufacturer and distributer of specialty chemicals all over the world. The company surpassed the Zacks Consensus Estimate in three of the prior four quarters, with an average positive earnings surprise of 10.63%. Moreover, for the current year, the company is projected to post year-over-year earnings improvement of 26.1%.

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.

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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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