Escalating tensions in the Middle East, as reflected in the Iran war, are now in a fragile ceasefire, creating significant uncertainty and making the U.S. stock market highly volatile. With fears dominating the market, it is ideal for investors to increase their allocation to low-beta stocks. Stocks that may attract investors' attention are Liquidia Corporation LQDA, Chevron Corporation CVX, Occidental OXY and Valero Energy Corporation VLO.
What Does Beta of a Stock Measure?
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 Using Research Wizard:
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 (Strong Buy): Zacks Rank #1 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 of the 19 stocks that qualified for the screening:
Liquidia
Liquidia is experiencing rapid growth in YUTREPIA adoption, with increasing patient referrals, expanding prescriber base and rising market share. The company has achieved profitability and is generating positive cash flow, supported by a strong cash position. It is also pursuing expansion into additional indications and larger market opportunities through ongoing and planned clinical developments.
Chevron
Chevron has a strong footprint in the Permian basin. CVX mentioned that it has an interest in one of every five wells in the most prolific basin. Over the years, while growing its operations in Permian, Chevron has been able to generate more production while employing lower capital spending, thanks to advanced drilling techniques. Being a producer of both oil and natural gas, the company is well-positioned to gain.
Occidental
In the United States, Occidental is a major producer of oil and natural gas. In the domestic market, OXY has been experiencing efficiency improvements, including higher production volumes, while reducing capital spending and lowering operating costs. For creating long-term value for shareholders, Occidental has a strong focus on redirecting capital toward higher-return oil and gas projects.
Valero Energy
Valero Energy is among the world's leading low-cost fuel producers, with a combined throughput capacity of 3 million barrels per day. In addition to its presence in traditional refining, the company has exposure to lower-carbon fuels, comprising sustainable aviation fuel, renewable diesel and ethanol.
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Chevron Corporation (CVX): Free Stock Analysis Report
Occidental Petroleum Corporation (OXY): Free Stock Analysis Report
Valero Energy Corporation (VLO): Free Stock Analysis Report
Liquidia Corporation (LQDA): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).