5 Top Low-Beta Stocks Flying High Despite Severe Volatility
Zacks Investment Research | Mar 10, 2020 09:05PM ET
Wall Street has been grappling with volatility over the past three weeks with coronavirus cases increasing significantly each passing day. The market has been on a roller-coaster ride with a gain of 5-7% one day and a decline of 7-8% on the next day. Market participants are yet to see any signs of stabilization.
Meanwhile, not all stocks are bearing the brunt of the market turmoil. A closer look at the market tells us a different story. A few low-beta (beta value less than 1 but greater than zero) stocks have actually recorded strong gain since these are less volatile than the broader market. Investment in some of such stocks with a favorable Zacks Rank is likely to be fruitful at this juncture.
Severe Volatility Rattles Wall Street
On Mar 9, Wall Street put up its worst performance since the last recession in 2008. The coronavirus outbreak and an unexpected crude oil price war between the OPEC and Russia-led consortium resulted in the collapse of the global stock markets.
The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — plunged 7.8%, 7.6% and 7.3%, respectively. In fact, the Dow plummeted 2,013.7 points, recording its worst-ever single-day performance pointwise and biggest single-day drop percentagewise since Oct 15, 2008.
However, on Mar 10, U.S. stock markets recovered some lost ground with the Dow posting a gain of 1,167.14 points. Notably, the Dow, the S&P 500 and the Nasdaq Composite rallied 4.8%, 4.9% and 5%, respectively. The indexes are currently around 15% away from their all-times highs achieved in mid-February.
Meanwhile, on Mar 9, the CBOE VIX — which reflects S&P 500 option bets to calculate expectations for volatility over the coming 30 days — jumped 30% to close at 54.46. This was the VIX’s highest closing since October 2008. On Mar 10, the VIX — popularly recognized as Wall Street’s best fear gauge — closed at 47.30, which was still significantly higher than its historical average range of 19 to 20. This clearly indicates that the market will remain choppy in the near term.
5 Low-Beta Stocks Flying High
We have narrowed down our search to five low-beta stocks that have popped in the past month, when coronavirus-led concerns shook global financial markets. We have applied three selection criteria.
We have picked stocks that witnessed upward earnings estimate revision for the year in the past 30 days. This indicates these stocks have strong potential irrespective of day-to-day market fluctuations. Second, these stocks have solid EPS growth rate for 2020. Third, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see Zacks Investment Research
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