Bet on These 4 Low-Beta Stocks to Navigate Market Uncertainty

Market volatility is likely to persist, with Federal Reserve officials projecting only a single rate cut this year despite the recent inflation report indicating easing price pressures. As a result, volatility and uncertainty may continue in the stock market, emphasizing the importance of assembling a portfolio consisting of low-beta stocks. These securities are expected to deliver strong returns while offering protection against unpredictable market conditions.

In this regard, stocks like The Vita Coco Company, Inc. COCO, Seanergy Maritime Holdings Corp. SHIP, Arcos Dorados Holdings Inc. ARCO and Palomar Holdings Inc PLMR 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 of the six stocks that qualified for the screening:

The Vita Coco Company, a prominent developer and distributor of coconut water products, is strategically investing in initiatives to broaden the range of occasions when consumers might enjoy coconut water. By promoting its versatility and highlighting its benefits across various contexts, the company aims to integrate coconut water into more aspects of daily life. This effort is significantly boosting the performance of its flagship Vita Coco Coconut Water brand, which is experiencing robust growth and increased market presence as a result.

Seanergy Maritime, a prominent shipping company, recently announced the acquisition of an additional Capesize vessel constructed in 2012 in Japan for a purchase price of $35.6 million. This strategic acquisition is expected to enhance the company's operational capacity and strengthen its position in the shipping market. SHIP is committed to providing significant returns to shareholders while concurrently renewing and expanding its fleet.

Arcos Dorados is the largest franchisee within the McDonald's system and operates on a robust business model. To mitigate risks associated with specific countries, the company has diversified its operational footprint over the past decade. While Brazil remains its primary market, Arcos Dorados has significantly benefited from the growth opportunities presented by dynamic markets such as Chile, Colombia and Uruguay, which have positively influenced its financial performance.

Palomar Holdings, a prominent specialty insurance provider, is demonstrating impressive growth, evidenced by the increase in both gross written premiums and net earned premiums. This growth highlights the company's favorable business climate. With a diverse portfolio of specialty insurance products, Palomar Holdings is well-positioned, reinforcing a positive full-year outlook.

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.

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