While the market seesaws under persistent inflationary pressure, fueled by rising rental housing costs, investors are left in a quandary. The specter of a looming rate cut this year also adds a layer of complexity. This cocktail of factors has whipped up a tempest of volatility in the market, compelling investors to seek refuge in the tranquility of low-beta stocks. These equities are touted to yield sturdy returns while offering a shield against the capricious whims of the market.
In this vein, stocks such as The Progressive Corporation PGR, Booz Allen Hamilton Holding Corporation BAH, Trip.com Group Limited TCOM, and Patria Investments Limited PAX stand out as beacons of hope amidst the maelstrom of market unpredictability.
Understanding Beta
Beta serves as a barometer of risk, gauging an asset’s volatility against the market. It provides insights into the extent of price movement for a security in comparison to the market. In this discussion, the market is represented by the S&P 500.
If a stock boasts a beta of 1, it is expected to mirror the market’s movements. A beta greater than 1 implies higher volatility than the market, while a beta lower than 1 suggests lower volatility than the market.
For instance, if the market yields a 20% return, a stock with a beta of 3 would deliver a staggering 60% return – an exhilarating ride. Conversely, when the market slumps by 20%, the stock would plummet by 60% – a gut-wrenching descent.
For the purpose of screening stocks that are less volatile than the market, we have applied a beta between 0 and 0.6 as our primary criterion. However, this criterion is not the sole factor in identifying a winning strategy. Other parameters that add value to the portfolio should also be considered.
Applying the Criteria
Percentage Change in Price in the Last 4 Weeks Greater Than Zero: This ensures that the stocks experienced positive price movement over the last month.
Average 20-Day Volume Greater Than 50,000: A robust trading volume ensures that the stocks are easily tradable.
Price Greater Than or Equal to $5: All stocks must trade at a minimum of $5 or higher.
Zacks Rank Equal to 1: Zacks Rank #1 (Strong Buy) stocks signal a strong potential for outperformance in the broader U.S. equity market over the next one to three months.
Stellar Picks
Among the qualified stocks is The Progressive Corporation, a major player in the domestic auto insurance market. The company continues to ride the wave of rising net earned premiums and is anticipated to witness a robust 45.3% earnings growth this year.
Booz Allen Hamilton Holding stands out as a premier provider of management and technology consulting, analytics, engineering, and digital solutions. The company is experiencing stellar organic revenue growth in the federal defense and civil markets.
Trip.com Group Limited is renowned for its global travel services. With the relaxation of travel restrictions, the global travel industry is undergoing a steady revival, lending strong support to TCOM.
Patria Investments Limited is a well-regarded global alternative investment firm. Managing combined assets of $31.8 billion as of Dec 31, 2023 – marking a 17% increase from the previous year’s $27.2 billion – the company maintains a strong focus on Latin America.
Unlock the full list of qualifying stocks by signing up now for a 2-week free trial to the Research Wizard, and start utilizing this screen in your own trading. Alternatively, you can create and test your own strategies before taking the plunge into investment. The Research Wizard provides an intuitive and easy-to-use platform to kickstart your investment journey.
Bottom Line
Market volatility may seem daunting, but low-beta stocks offer a respite – a calm harbor amid turbulent waters. With a prudent selection of low-beta stocks such as PGR, BAH, TCOM, and PAX, investors can navigate the market’s rough seas with greater confidence and resilience. Let’s steer our investment ship with astuteness and purpose, leveraging the stability of low-beta stocks to weather the storm and emerge stronger and more prosperous in the end.
