Successful investors make a detailed and thorough analysis before placing their bets. They never follow the crowd blindly and don’t always go for risky stocks. Securities having high risks mostly give lucrative returns when the market is bullish. However, the situation reverses when the market turns bearish.
We have developed a strategy that clearly shows stocks with low risks could also reward investors with handsome returns.
Beta Understanding
Beta measures the volatility or risk of a particular asset in comparison 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 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 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 beta between 0 and 0.6 as our prime criterion for screening stocks that are less volatile than the market. But 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 one 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 five of the 17 stocks that qualified the screening:
Headquartered in El Segundo, CA, Stamps.com Inc. STMP primarily provides solutions related to shipping through Internet. The company surpassed the Zacks Consensus Estimate in each of the prior four quarters, the average positive earnings surprise being 42.53%. Also, the Zacks Consensus Estimate for both first-quarter 2018 and full-year 2018 have been revised upward over the prior 60 days.
ICU Medical, Inc. ICUI, headquartered in San Clemente, CA, is a leading developer of advanced medical devices. The company beat the Zacks Consensus Estimate in all the prior four quarters. For 2018 and 2019, we are expecting the company to witness earnings growth of 8.5% and 26.3% respectively.
Headquartered in Burlington, MA, LeMaitre Vascular, Inc. LMAT supports patients with peripheral vascular disease by providing services and implants for their treatment. The earnings surprise history is impressive as the firm beat the Zacks Consensus Estimate in all the prior four quarters. The stock will likely witness earnings growth of 13.9% and 14.9% for 2018 and 2019, respectively.
Headquartered in Chicago, IL, United States Cellular Corporation USM is a leading provider of services related to wireless telecommunications. The company delivered an average positive earnings surprise of 306.5% for the prior four quarters. The stock will also likely experience earnings growth of 20.7% and 29.5% for 2018 and 2019, respectively.
Everest Re Group, Ltd. RE, headquartered in Hamilton, Bermuda, primarily provides products related to insurance and reinsurance. The company beat the Zacks Consensus Estimate in three of the prior four quarters. We expect the company to see year-over-year earnings growth of 138.6% and 7.7% for 2018 and 2019, respectively.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
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