Low-beta stocks can provide several beneficial advantages for portfolios, including stability, defensive qualities, and stabilization when combined with high-beta stocks, helping to provide a more balanced risk profile.
And for those seeking a less volatile approach, three low-beta stocks – Arch Capital Group ACGL, Allison Transmission Holdings ALSN, and Dr. Reddy’s Laboratories RDY – could be considered. All three sport a favorable Zacks Rank, carry solid growth, and sport sound valuations.
Let’s take a closer look at each.
Arch Capital Group
Arch Capital Group, a current Zacks Rank #1 (Strong Buy), writes insurance, reinsurance, and mortgage insurance worldwide. Earnings expectations have jumped higher across the board, reflecting optimism among analysts.
Shares aren’t expensive given the company’s forecasted growth, with earnings forecasted to climb nearly 40% in its current year on 30% higher revenues. Shares currently trade at an 11.6X forward earnings multiple (F1), beneath the 12.6X five-year median and the respective Zacks – Insurance industry average.
It’s worth noting that the company has been a consistent earnings performer, exceeding Zacks Consensus Estimates in five consecutive quarters. In its latest release in late July, ACGL penciled in a 16% EPS beat and posted a positive 2.3% revenue surprise.
Allison Transmission Holdings
Allison Transmission is the largest producer of fully automatic transmissions for medium, heavy-duty commercial, and heavy-tactical U.S. defense vehicles. The company has seen positive earnings estimate revisions among all timeframes, landing it into a Zacks Rank #1 (Strong Buy).
ALSN shares could also attract those who prefer income, currently yielding 1.6% annually. And the company has been committed to increasingly rewarding shareholders, sporting a 10% five-year annualized dividend growth rate.
The company’s current 8.4X forward earnings multiple certainly isn’t expensive, beneath the 9.5X five-year median and the 20.8X average of the Zacks – Autos/Tires/Trucks industry average. Allison Transmission is forecasted to see 25% EPS growth on 10% higher revenues in its current year.
Dr. Reddy’s Laboratories
Dr. Reddy’s Laboratories, a current Zacks Rank #1 (Strong Buy), is an integrated global pharmaceutical company engaged in providing affordable and innovative medicines. No different than those above, the company has enjoyed favorable earnings estimate revisions.
RDY shares presently trade at a 17.9X forward earnings multiple, reflecting a 41% discount relative to the Zacks – Drugs industry average and well below 2022 highs of 28.6X. The company is forecasted to see 15% EPS Growth paired with a 10% revenue bump in its current year (FY24).
Like ALSN, income-focused investors could find RDY shares attractive, with shares currently yielding a respectable 0.6% annually paired with a sustainable payout ratio sitting at 9% of the company’s earnings. The payout has grown by 3.6% annually over the last five years.
Bottom Line
Low-beta stocks can provide many beneficial advantages for investors, including a more defensive nature and overall portfolio balance.
And for those seeking this approach, all three low-beta stocks above – Arch Capital Group ACGL, Allison Transmission Holdings ALSN, and Dr. Reddy’s Laboratories RDY – could be great considerations.
All three sport a favorable Zacks Rank, carry sound valuation pictures, and sport solid growth profiles for their current and subsequent fiscal years.
Dr. Reddy’s Laboratories Ltd (RDY): Free Stock Analysis Report
Allison Transmission Holdings, Inc. (ALSN): Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL): Free Stock Analysis Report
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