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The U.S. Federal Reserve reduced its target range for the federal funds rate by 50 basis points. While the market initially responded positively to this significant rate cut, investors soon began to worry that such a considerable reduction might indicate a more severe economic slowdown than previously anticipated. This concern is likely to lead to increased market volatility.
Given this uncertainty, constructing a portfolio of low-beta stocks may be prudent. In this regard, stocks like Erie Indemnity Company (ERIE - Free Report) , Sprouts Farmers Market Inc. (SFM - Free Report) , Mission Produce Inc. (AVO - Free Report) and Abacus Life Inc. (ABL - Free Report) are worth betting on.
What are Low Beta Stocks?
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 Using Research Wizard:
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. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are four among eight stocks that qualified for the screening:
Erie Indemnity
Erie Indemnity is gaining from a rise in management fee revenues from policy issuance and renewal services as well as from administrative services. Further, compared to the composite stocks belonging to the industry, the company has a much stronger balance sheet.
Sprouts Farmers Market
Increasing engagement of customers and solid comparable store sales are benefiting Sprouts Farmers Market. The company's board of directors has approved a new $600 million share repurchase program, reflecting its robust cash flow generation. In 2024, SFM plans to open roughly 35 new stores and anticipates total net sales growth in the range of 9% to 10%.
Mission Produce
As a global leader in the avocado industry, Mission Produce is well-positioned to capitalize on the growing consumer demand for healthy eating. Avocados, rich in more than 20 vitamins and minerals, offer significant health benefits for the heart, skin, and weight management, making them an increasingly popular choice among health-conscious consumers.
Abacus Life
Abacus is a prominent company in the field of alternative asset management and market making. In mid-July, the company revealed plans to acquire Carlisle Management. The acquisition is projected to boost Abacus's assets under management by about $2 billion and drive the global expansion of ABL Wealth. Carlisle Management, a well-established investment firm in the life settlement industry, is set to play a pivotal role in facilitating this growth.
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.
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.
The U.S. Federal Reserve reduced its target range for the federal funds rate by 50 basis points. While the market initially responded positively to this significant rate cut, investors soon began to worry that such a considerable reduction might indicate a more severe economic slowdown than previously anticipated. This concern is likely to lead to increased market volatility.
Given this uncertainty, constructing a portfolio of low-beta stocks may be prudent. In this regard, stocks like Erie Indemnity Company (ERIE - Free Report) , Sprouts Farmers Market Inc. (SFM - Free Report) , Mission Produce Inc. (AVO - Free Report) and Abacus Life Inc. (ABL - Free Report) are worth betting on.
What are Low Beta Stocks?
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 Using Research Wizard:
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. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are four among eight stocks that qualified for the screening:
Erie Indemnity
Erie Indemnity is gaining from a rise in management fee revenues from policy issuance and renewal services as well as from administrative services. Further, compared to the composite stocks belonging to the industry, the company has a much stronger balance sheet.
Sprouts Farmers Market
Increasing engagement of customers and solid comparable store sales are benefiting Sprouts Farmers Market. The company's board of directors has approved a new $600 million share repurchase program, reflecting its robust cash flow generation. In 2024, SFM plans to open roughly 35 new stores and anticipates total net sales growth in the range of 9% to 10%.
Mission Produce
As a global leader in the avocado industry, Mission Produce is well-positioned to capitalize on the growing consumer demand for healthy eating. Avocados, rich in more than 20 vitamins and minerals, offer significant health benefits for the heart, skin, and weight management, making them an increasingly popular choice among health-conscious consumers.
Abacus Life
Abacus is a prominent company in the field of alternative asset management and market making. In mid-July, the company revealed plans to acquire Carlisle Management. The acquisition is projected to boost Abacus's assets under management by about $2 billion and drive the global expansion of ABL Wealth. Carlisle Management, a well-established investment firm in the life settlement industry, is set to play a pivotal role in facilitating this growth.
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.
Click here to sign up for a free trial to the Research Wizard today.
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.