3 Low-Volatility Stocks for a Stable Investment Strategy

  • Here are three low-volatility stocks investors should be watching right now.
  • Walmart (WMT): Expected to benefit from surging retail sales.
  • Astra Zeneca (AZN): A deep pipeline of drugs and global diversification ensures healthy revenue growth.
  • Newmont Corporation (NEM): With gold trending higher, Newmont looks very attractive.
low-volatility stocks - 3 Low-Volatility Stocks for a Stable Investment Strategy

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With another rate hike by the Fed, the markets remain in an uncertain zone. In all probability, the Fed will pause on rate hikes. However, it makes sense for investors to remain cautious. Indeed, considering heightened recession possibilities, turbulence in the financial sector, and inflation, the markets might continue to exhibit volatility. Therefore, having a portfolio based on a foundation of low-volatility stocks is important, for those who value capital preservation.

In general, low-volatility stocks have a low beta and are blue-chip stocks. Besides providing capital preservation, these stocks also offer a healthy dividend yield. In addition, attractive valuations are a bonus, as total returns from these low-volatility stocks can be healthy over the next few years.

Of course, it’s important to create a diversified portfolio. I would, however, recommend at least 50% exposure to blue-chip stocks. The remaining exposure can be towards high-quality growth stocks. This mix would be a stable investment strategy.

Let’s discuss three low-volatility stocks with healthy total return potential.

WMT Walmart $151.81
AZN Astra Zeneca $75.27
NEM Newmont Corporation $48.73

Walmart (WMT)

Image of Walmart (WMT) logo on Walmart store with clear blue sky in the background
Source: Jonathan Weiss / Shutterstock.com

Walmart’s (NYSE:WMT) stock has traded relatively sideways over the last 12 months. Nevertheless, WMT stock is attractive, and in my view, the best pick among low-volatility stocks. Besides WMT stock’s low-beta status, there are a few other important reasons to like this top retailer.

First, WMT stock offers a dividend yield of 1.5%, with a strong and stable growth outlook. Further, the U.S. economy is driven by consumer spending, and retail sales are a key part of the consumption basket. With fears of recession, I expect policymakers to focus on boosting consumption spending. This will be positive for Walmart.

It’s worth noting that for FY24, Walmart has guided for consolidated net sales growth of 2.5% to 3%. However, the company expects international net sales to increase by 6%. International markets are likely to remain the key growth driver for Walmart in the coming years.

From the perspective of shareholder returns, Walmart reported operating cash flow of $29.1 billion and free cash flow of $12.2 billion. Thus, this is a mega-cap stock with ample flexibility for dividends and share repurchases.

Astra Zeneca (AZN)

Exterior of the AstraZeneca's manufacturing facility at Snackviken
Source: Roland Magnusson / Shutterstock.com

In general, bio-pharmaceutical stocks are low-volatility stocks. Astra Zeneca (NASDAQ:AZN) is a top pick from the sector for two reasons. First, the stock trades at an attractive forward price-earnings ratio of 20.2-times. Additionally, AZN stock offers an attractive dividend yield of 2.6%.

From a business perspective, Astra Zeneca has a pipeline of 178 drugs in various stages of clinical development. In addition, more than 30 Phase 3 trials are due in 2023. An attractive pipeline of drugs will ensure that the company’s revenue growth remains strong.

Considering its pipeline, Astra Zeneca expects low double-digit revenue growth through 2025. However, the company expects to deliver growth above the industry average, even beyond this period.

Astra Zeneca is also well-diversified from a geographical perspective. As of 2022, the company reported 60% of its revenue from the U.S. and Europe. Accordingly, emerging markets will increasingly contribute to its growth over the next few years.

Newmont Corporation (NEM)

Newmont logo on a mobile phone screen
Source: Piotr Swat/Shutterstock

Newmont Corporation (NYSE:NEM) is an undervalued low-beta stock worth holding in a core portfolio. Gold has been trending higher with fears around inflation, a recession, and geopolitical tensions. Therefor, I think now is a great time to remain invested in gold miners.

NEM stock trades at an attractive forward price-earnings ratio of 19.7-times. Additionally, the stock offers a healthy dividend yield of 2.1%. If gold remains in an uptrend, attractive dividend growth seems likely. To put things into perspective, Newmont expects to report a $400 million increase in free cash flow for every $100 increase in the price of gold.

With 96 million ounces of reserves, Newmont holds impressive high-quality assets. This will ensure stable production in the coming years. Newmont has also guided for a reduction in its all-in-sustaining-cost over the next three years. This will ensure EBITDA margin expansion, even if gold trades sideways. Newmont is positioned to create sustained shareholder value with a solid and stable investment-grade balance sheet.

On the date of publication, Faisal Humayun did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Faisal Humayun is a senior research analyst with 12 years of industry experience in the field of credit research, equity research and financial modeling. Faisal has authored over 1,500 stock specific articles with focus on the technology, energy and commodities sector.


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