Success in stock market investing comes from intense research and analysis and not from taking leaps in the dark.
We need to know that the belief that only “risky stocks generate lucrative returns” is a common misconception. In this article, we have come up with an investment strategy that clearly shows that less risky securities can also generate handsome returns if some parameters are considered.
Beta measures the volatility or risk of a particular asset in comparison to the market. In other words, beta measures the extent of a security’s price movement relative to the market. In this article, we are considering the S&P 500 as the market.
If a stock has beta of 1 then the price of the stock will move with the market. So, the stock is more volatile than the market if its beta is more than 1. In the same way, the stock is not as volatile as the market if its beta is less than 1.
For example, if the market offers a return of 20%, a stock with beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20% the stock will sink 60%, which is devastating.
We have taken beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. But this should not be the only factor to be considered while selecting a winning strategy. We need to take into account other parameters that can add value to the portfolio.
Percentage Change in Price in the Last 4 Weeks greater than zero: This ensures that the stocks saw positive price movement over the past month.
Average 20 Day Volume greater than 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 19 stocks that qualified the screening:
Low-Beta Stocks to Brave Market Volatility: Medifast (MED)
Headquartered in Baltimore, MD, Medifast (NYSE:MED) is one of the major providers of healthy living products.
The company beat the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 16.6%.
The firm will likely post earnings growth of 96.5% and 30% in 2018 and 2019, respectively.
Low-Beta Stocks to Brave Market Volatility: Endo International (ENDP)
Endo International (NASDAQ:ENDP), headquartered in Dublin, Ireland, is a leading pharmaceutical firm.
The company beat the Zacks Consensus Estimate in all the prior four quarters, with the average positive earnings surprise being 29.1%.
Over the past 30 days, the Zacks Consensus Estimates for 2018 and 2019 have been revised upward.
Low-Beta Stocks to Brave Market Volatility: HCA Healthcare (HCA)
Headquartered in Nashville, TN, HCA Healthcare (NYSE:HCA) is primarily engaged in providing healthcare services.
The company beat the Zacks Consensus Estimate in three of the past four quarters, the average positive earnings surprise being 8.2%.
In 2018 and 2019, the company will likely post earnings growth of 40.1% and 7.4%, respectively.
Low-Beta Stocks to Brave Market Volatility: Five9 (FIVN)
Five9 (NASDAQ:FIVN), headquartered in San Ramon, CA, is one of the major suppliers of cloud contact center software.
The company has an impressive earnings surprise history, with its average positive earnings surprise being 229.2% for the past four quarters.
Low-Beta Stocks to Brave Market Volatility: FTI Consulting (FCN)
Headquartered in Washington, District of Columbia, FTI Consulting (NYSE:FCN) is among the leading advisory firms with services like assistances to enterprises for minimizing risk, resolving disputes, etc.
The company beat the Zacks Consensus Estimate in all of the prior four quarters, the average positive earnings surprise being 58.3%.
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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