Buy These 3 Low-Beta Stocks To Counter Market Volatility

Many economists are of the opinion that despite the Federal Reserve's efforts to reduce inflation, economic growth will not be affected. This is because there are signals that the economy of the United States is on track for a soft landing.  The market is expected to be volatile since investors are focusing on U.S. inflation data, due on Wednesday. Hence, creating a portfolio of low-beta stocks is paramount since the securities will deliver healthy returns and shield against choppy market conditions.

In this regard, stocks like Penumbra Inc. (PEN) , Strategic Education, Inc. (STRA) and Huron (HURN) are worth betting on.

 

Understanding Beta

Beta measures the volatility or risk of a particular asset compared 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 a 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 a beta of 3 will return 60%, which is overwhelming. Similarly, when the market slips 20%, the stock will sink 60%, which is devastating.

 

Screening Criteria:

We have taken a beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. However, 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 last 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 three stocks that qualified for the screening:

Penumbra, headquartered in Alameda, CA, is among the leading healthcare players focusing on innovative therapies. PEN, having a global presence, primarily addresses challenging medical conditions through its broad portfolio of novel products. Rising sales of neuro and vascular products continue to aid Penumbra.

Rising enrollment trends in the U.S. Higher Education segment continue to aid Strategic Education. The Education Technology Services segment is also acting as a catalyst. As Strategic Education is progressing to meet its guidance for earnings growth this year, it is committed to promoting economic mobility in working adults.

Huron is being aided by solid organic growth in each of its operating segments. The top line of the global professional services firm is continually being favored by rising demand for consulting and managed services and digital capabilities.

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.


More By This Author:

Can Home Depot's (HD) Strategies Help Overcome Near-Term Woes?
3 Midstream Stocks To Gain Amid Energy Market Volatility
4 Industrial Services Stocks Countering Industry Headwinds

Disclaimer: Neither Zacks Investment Research, Inc. nor its Information Providers can guarantee the accuracy, completeness, timeliness, or correct sequencing of any of the Information on the Web ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.