Uncertainty prevails in the market, with investors waiting for fresh inflation data and corporate earnings. The market could be volatile as the data are likely to determine the path of interest rate hikes by the Federal Reserve. Market pundits are fearing potential recession as a strong job report is possibly encouraging the Fed to continue its aggressive increase in interest rate.

Hence, creating a portfolio of low-beta stocks is of utmost importance as the securities will deliver healthy returns and shield against volatile market conditions. In this regard, stocks like Sanderson Farms, Inc. SAFM, Otter Tail Corporation OTTR, J&J Snack Foods Corp. JJSF and AMN Healthcare Services, Inc. AMN are worth betting on.

Beta Understanding

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 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. However, this should not be the only factor to be considered while selecting a winning strategy. We need to take into account other parameters as well 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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Here are four stocks among 16 that qualified the screening:

Sanderson Farms secures stable cashflows from producing, processing and distributing fresh, frozen and minimally prepared chicken. Backed by higher average selling prices, Sanderson Farms is experiencing increased margins. For fiscal 2022, Sanderson Farms has witnessed increased earnings estimate revisions over the past 30 days.