Buy 5 Top-Ranked Low-Beta Stocks to Counter Market Volatility

Wall Street has just entered its longest ever expansion. However, U.S. stock markets have remained extremely volatile in 2018. While there are several reasons for day-to-day market fluctuations, three major issues are likely to make markets more volatile in the near term.

Legal woes of President Donald Trump, lingering trade disputes with China and geopolitical concerns especially related to Iran are likely to impact investors’ decisions primarily. Escalation of any of these issues will further aggravate market volatility. At this juncture, investment in low-beta stocks with favorable Zacks Rank will be a lucrative option.

Trump Facing Legal Worries

On Aug 21, Trump's former personal attorney Michael Cohen pleaded guilty to eight criminal cases in Manhattan federal court. Major charges against Cohen are tax fraud, campaign contributions, making false statements to a financial institution, and unlawful corporate contributions. Cohen also confessed to paying money to two women on Trump’s behest to silence them. Charges against Cohen may result in 65 years of imprisonment.   

In a separate case, former Trump campaign manager, Paul Manafort was found guilty on eight counts on the same day. Out of the eight cases, five were related to tax fraud, two to bank fraud and one for non-filling of foreign bank account reports.

Some political experts have stated that legal problems of Trump will be detrimental to Republicans’ chances of winning the upcoming mid-term polls for the U.S. Congress scheduled in November.

Trade War Fears Persist

On Aug 23, the U.S. government officially imposed 25% tariffs worth $16 billion on Chinese imports. So far, the Trump administration has levied $50 billion of tariffs on China prompting the Asian economic superpower to retaliate with tariffs worth the same amount of U.S. goods. Moreover, President Trump is considering imposing another round of tariffs worth $200 billion on Chinese goods this week.

Notably, in the latest release of minutes of the Federal Reserve's meeting, the Fed officials have unanimously opined that escalation of global trade conflicts could hinder businesses and households. The Fed has stated that lingering global trade disputes are the biggest source of risk and uncertainty to the growing economic prosperity of the United States.

Iran Conflict Remains

In May, the United States walked out of the Iran nuclear pact formed in 2015. The Trump administration wants all countries to stop importing oil from Iran by Nov 4 or face the risk of U.S. sanctions.

The scenario worsened after Jul 25, when Iran-backed Houthi rebels attacked two Saudi oil tankers passing through the Bab al-Mandab Strait. The United States is contemplating military action against Iran so that the key trade waterways in the Middle East remain open.

Our Top Picks

Stock markets are likely to remain volatile in near future due to trade concerns, geopolitical conflicts and political issues. At this stage, investment in low-beta stocks will be fruitful. When beta is equal to 1 it means that the stock is as volatile as the market. So, a stock is relatively more volatile if it has beta greater than 1 and less volatile if beta is less than 1. However, picking winning stocks can be a difficult task.

This is where our VGM Score comes in handy. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select the winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a VGM Score of either A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows price performance of our five picks in the last three months.

Patrick Industries Inc. PATK is a major manufacturer of component products and distributor of building products and materials for Recreational Vehicle, Manufactured Housing and Marine industries. It has a beta of 0.76 and a VGM Score of A. The company has expected earnings growth of 49.4% for current year. The Zacks Consensus Estimate for the current year has improved by 5.3% over the last 30 days.

Johnson Outdoors Inc. JOUT is a leading global outdoor recreation company that turns ideas into adventure with innovative top-quality products. It has a beta of 0.53 and a VGM Score of A. The company has expected earnings growth of 46.4% for current year. The Zacks Consensus Estimate for the current year has improved by 11.6% over the last 30 days.

CRA International Inc. CRAI is an economics, finance, and business consulting firm that works with businesses, law firms, accounting firms, and governments in providing a wide range of services. It has a beta of 0.80 and a VGM Score of A. The company has expected earnings growth of 19.4% for current year. The Zacks Consensus Estimate for the current year has improved by 4.6% over the last 30 days.

Rocky Brands Inc. RCKY is a leading designer, manufacturer and marketer of premium quality footwear and apparel brands. It has a beta of 0.17 and a VGM Score of B. The company has expected earnings growth of 46.6% for current year. The Zacks Consensus Estimate for the current year has improved by 13.3% over the last 30 days.

The Progressive Corp. PGR provides personal and commercial property-casualty insurance, and other specialty property-casualty insurance as well as related services primarily in the United States. It has a beta of 0.68 and a VGM Score of B. The company has expected earnings growth of 71.1% for current year. The Zacks Consensus Estimate for the current year has improved by 3% over the last 30 days.

The Hottest Tech Mega-Trend of All

Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.

See Zacks' 3 Best Stocks to Play This Trend >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
The Progressive Corporation (PGR) : Free Stock Analysis Report
 
Johnson Outdoors Inc. (JOUT) : Free Stock Analysis Report
 
Rocky Brands, Inc. (RCKY) : Free Stock Analysis Report
 
CRA International,Inc. (CRAI) : Free Stock Analysis Report
 
Patrick Industries, Inc. (PATK) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research