Investing

Buy These 3 Low-Beta Stocks to Navigate Volatility

Derek Lewis

Published: August 25, 2023 11:04 pm

Last Updated: August 28, 2023 11:07 am

Volatility has hit the market following the end of the Q2 cycle, with several areas facing pressure in the near term. Technology has gotten a haircut after its remarkable run, whereas energy stocks have primarily enjoyed positive price action amid the recent rise in oil prices.

During times of market volatility, investors can benefit by targeting low-beta stocks, as they’re less susceptible to the general market’s movements.

Three low-beta stocks – Arch Capital Group ACGL, NetEase NTES, and Chubb Limited CB – could all be considerations for those looking to shield themselves against volatility. Let’s take a closer look at each.

Arch Capital Group

Arch Capital Group writes insurance, reinsurance, and mortgage insurance worldwide. The company is a Zacks Rank #1 (Strong Buy), with earnings expectations increasing across the board.

Given its growth trajectory, the company’s shares aren’t expensive, currently trading at an 11.2X forward earnings multiple. ACGL is forecasted to see 40% earnings growth in its current year on 30% higher revenues, with estimates for FY25 alluding to a further 10% bump in the bottom line paired with a 15% sales increase.

Arch Capital is a consistent earnings performer, exceeding the Zacks Consensus EPS Estimate by an average of 27% across its last four releases. Just in its latest print, ACGL exceeded consensus earnings and revenue estimates by 16% and 2%, respectively.

NetEase

NetEase, a current Zacks Rank #1 (Strong Buy), is an Internet technology company engaged in the development of applications, services, and other technologies for the Internet in China. Analysts have taken their earnings expectations higher across all timeframes.

For those who prefer dividends, NTES shares have that covered; shares currently yield 1.9% annually paired with a payout ratio sitting at 22% of the company’s earnings. Dividend growth is also apparent, with the company sporting a sizable 25% five-year annualized dividend growth rate.

And similar to ACGL, NetEase shares aren’t expensive given the company’s forecasted growth, with earnings forecasted to see a 23% improvement on 4% higher sales in its current year. Shares trade at a 15.9X forward earnings multiple (F1), nowhere near the steep 26.3X five-year median.

Chubb Limited

Chubb, a Zacks Rank #2 (Buy), is the world’s largest publicly traded property and casualty insurance company. Like NTES, the company sports a shareholder-friendly nature, with shares currently yielding 1.7% annually.

Chubb’s payout has grown by a modest 3% annualized over the last five years.

In addition, the company’s return on equity (ROE) has been on a solid trajectory, as we can see illustrated in the chart below. This reflects that Chubb has been successfully generating profits from existing assets, which is undoubtedly a positive.

Bottom Line

Targeting low-beta stocks can help shield against volatility, as these stocks are less sensitive to the general market’s movements. And with volatility ticking higher as of late, it could be beneficial to consider adding low-beta stocks.

And all three above – Arch Capital Group ACGL, NetEase NTES, and Chubb Limited CB – could be considered, as their earnings outlooks have recently shifted positively.
Chubb Limited (CB): Free Stock Analysis Report

NetEase, Inc. (NTES): Free Stock Analysis Report

Arch Capital Group Ltd. (ACGL): Free Stock Analysis Report

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