Although coronavirus vaccines are rolling out at a breakneck pace, the Omicron variant will keep the market extremely volatile. The variant continues to hurt corporate earnings. In addition, slowing spending and manufacturing activities are worrying investors.
Therefore, creating a portfolio of low-beta stocks is of utmost importance, as the stocks will offer healthy returns and provide protection against volatile market conditions.
Meaning of beta
Beta measures the volatility or risk of a particular asset relative to the market. In other words, beta measures the extent of a security’s price movement relative to the market. In this article, we consider the S&P 500 as the market.
If a stock has a beta of 1, the stock price will move with the market. Thus, the stock is more volatile than the market if its beta is greater than 1. Similarly, the stock is less volatile than 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 drops 60%, which is devastating.
We have taken beta between 0 and 0.6 as the main criterion for selecting stocks that are less volatile than the market. However, this should not be the only factor to consider when selecting a winning strategy. We must also consider other parameters that can add value to the portfolio.
Percentage change in price over the last 4 weeks greater than zero: This ensures that the stocks have seen positive price movement over the past month.
Average volume over 20 days greater than 50,000: Substantial trading volume ensures that the shares are easily tradable.
Price greater than or equal to $5: They must all trade at a minimum of $5 or more.
Zacks Rank equal to 1: Zacks Rank #1 (Strong Buy) shares indicate that they will significantly outperform the broader US stock market over the next one to three months. You can see the full list of today’s Zacks #1 Rank stocks here.
Here are four titles out of eight that qualified the screening:
Sensus Healthcare, Inc. (SRTS – Free Report) is a leading manufacturer of superficial radiation therapy devices. The Zacks consensus estimate for Sensus Healthcare’s net income for 2021 and 2022 has been revised upwards in the past 30 days.
Sensus Healthcare expects to report record sales for the December 2021 quarter and expects the momentum to continue in the first quarter of this year. Sensus Healthcare stock has jumped 128.2% in the past year against a 3.9% drop in industry-owned composite stocks.
Toyota Motor Corporation (MT – Free Report) is a leading manufacturer and designer of passenger and commercial vehicles. With the goal of producing millions of electric vehicles in the years to come, Toyota Motor is promoting electrification strategies that will drastically reduce CO2 emissions.
All of these initiatives are reflected in TM’s share price. Shares of Toyota Motor have jumped 42% over the past year, outpacing the 8.5% rise in industry-owned composite stocks.
ACM Research, Inc. (CCMR – Free Report) has always been on investors’ radar for providing cost-effective, high-performance process solutions used by semiconductor manufacturers to dramatically improve productivity.
With a mission to become one of the world’s leading suppliers of equipment to the semiconductor industry, ACM Research expects to experience strong growth this year. Over the past 30 days, ACM Research has witnessed upward revisions to earnings estimates for 2022.
Vocera Communications, Inc. (VCRA – Free Report) is a leading provider of clinical communication and workflow solutions. To engage with patients and families while collaborating with colleagues, many hospitals and healthcare facilities have chosen Vocera solutions.
Over the past year, Vocera’s stock price has gained 83.5% against an 8% rise in industry-owned composite stocks.
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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 the options mentioned herein. An affiliated investment advisory firm may hold or have shorted securities and/or hold long and/or short positions in options mentioned herein.
Disclosure: Information on the performance of Zacks portfolios and strategies is available at: https://www.zacks.com/performance.