Investors are now concerned with several events dampening the ebullient market’s mood. Among them, the recent development of downgrading the credit ratings of several small to mid-sized U.S. banks by Moody’s is alarming. Thus, investors are demanding portfolio protection from expected wild market swings. 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 Trip.com Group Limited TCOM, Dr. Reddy’s Laboratories Limited RDY, Sterling Check Corp. STER and MINISO Group Holding Limited MNSO 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 four stocks among 11 that qualified for the screening:
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.
Dr. Reddy’s Laboratories has global operations in 74 countries. Analysts are bullish on RDY as its North American generic business and its emerging markets’ generic operations will likely continue to thrive.
MINISO Group Holding is a leading retailer and wholesaler of lifestyle products. MINISO Group believes that in 2023, it will be able to open more than 250-350 stores (its original goal) in China. This could be possible, thanks to a bullish business outlook from its retail partners.
The background and identity screening space is growing rapidly, creating opportunities for Sterling Check. STER has been working on its key focus areas this year, like generating organic revenues with cost structure optimizations.
Dr. Reddy’s Laboratories Ltd (RDY): Free Stock Analysis Report
Trip.com Group Limited Sponsored ADR (TCOM): Free Stock Analysis Report
MINISO Group Holding Limited Unsponsored ADR (MNSO): Free Stock Analysis Report
Sterling Check Corp. (STER): Free Stock Analysis Report
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