There have been signs of disinflation, which could be encouraging. But, with slowing U.S. business activity and expectations of tepid second-quarter earnings, the broader market will likely be extremely volatile. Hence, creating a portfolio of low-beta stocks is of utmost importance since the securities will deliver healthy returns and shield against choppy market conditions.
In this regard, stocks like Arcosa Inc. ACA, Trip.com Group Limited TCOM, Autohome Inc. ATHM and RLI Corp. RLI 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. You can see the complete list of today’s Zacks #1 Rank stocks here.
Here are four stocks among nine that qualified for the screening:
Autohome is a leading provider of professionally generated content, user-generated content and AI-generated content to automobile consumers. As a result, it is capable of reaching a huge user base of automobile consumers. Thus, for conducting advertising campaigns, dealers and automakers are considering ATHM as a preferred platform.
Arcosa has a strong geographic footprint and a well-diversified portfolio and solutions that could support infrastructure growth. Arcosa is also leading the market when it comes to the products that are key to transportation infrastructure.
Trip.com Group Limited is well known for providing global travel services. Owing to the relaxation of travel restrictions, the global travel industry is recovering, which in turn is aiding TCOM.
RLI Corp. is a well-known name with deep underwriting expertise. RLI boasts that it has been delivering underwriting profits for 27 successive years.
RLI Corp. (RLI): Free Stock Analysis Report
Autohome Inc. (ATHM): Free Stock Analysis Report
Arcosa, Inc. (ACA): Free Stock Analysis Report
Trip.com Group Limited Sponsored ADR (TCOM): Free Stock Analysis Report
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