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Wednesday Leaves Wall Street Battered: 5 Low-Beta Stock Picks

Zacks

On Oct 10, Wall Street witnessed its worst day in eight months. The broad-based collapse in U.S. stock markets resulted as investors’ panicked on soaring yields on government bonds and lingering trade-conflicts with China.

The situation is likely to intensify in the near term with mid-term Congressional elections less than a month away and the Federal Reserve signaling one more rate hike this year. At this juncture, it will be prudent to invest in in low-beta stocks with favorable Zacks Rank to keep one’s portfolio safe from day-to-day market fluctuations.

Wall Street Collapses on Wednesday

On Oct 10, Wall Street witnessed a broad-based market decline. The 30-stock Dow declined 831.83 points or 3.2%. This was the blue-chip index’s largest single-day fall since Feb 8. The index fell below its 50-day moving average, reflecting more short-term volatility.

The S&P 500 lost 94.66 points or 3.3%, its largest single-day decline since early February. The benchmark index recorded its fifth straight day of loss, the longest one since November 2016. The broad-market index also fell below its 50-day and 100-day moving averages.

Meanwhile, Nasdaq Composite declined 315.97 points or 4.1%, marking is largest single day sell-off since Jun 24, 2016. Notably, the tech-laden index closed below its 200-day moving average, a psychological barrier indicating more long-term volatility.

Soaring Yields on Government Bonds

The yields on 10-year U.S. Treasury Note, 30-year U.S. Treasury Note and 2-year U.S. Treasury Notes, are currently hovering around their seven years, four years and ten years highs, respectively.

Higher interest rate will raise the cost of funds of investing in risky assets like equities. Instead investors may be better off investing money in risk-free government securities. Additionally, on Oct 3, Jerome Powell, Chairman of the Fed announced that the country has to go a long way for interest rate to hit neutral, a clear indication of further rate hikes.

Wednesday’s stock market rout has shaken the technology sector. S&P 500’s Technology Select Sector SPDR (XLK) was down 4.9%, its steepest single-day fall since August 2011.

Our Top Picks

At this stage, investment in low-beta stocks will be fruitful. The beta is equal to 1 which 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, which helps us to select winners. We narrowed down our search on five stocks. Each of these stock have a Zacks Rank #1 (Strong Buy) and a VGM Score A. 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 six months.

Rent-A-Center Inc. RCII leases household durable goods to customers on a rent-to-own basis in the United States. It has a beta of 0.58. The company has expected earnings growth of 238.9% for current year. The Zacks Consensus Estimate for the current year has improved by 21% over the last 60 days.

Global Brass and Copper Holdings Inc. BRSS converts, fabricates, processes and distributes specialized non-ferrous products in the United States, Asia Pacific and Mexico. It has a beta of 0.28. The company has expected earnings growth of 14.8% for current year. The Zacks Consensus Estimate for the current year has improved by 6.3% over the last 60 days.

North American Construction Group Ltd. NOA provides heavy construction and mining services primarily in Canada. It has a beta of 0.36. The company has expected earnings growth of 235.7% for current year. The Zacks Consensus Estimate for the current year has improved by 2.2% over the last 60 days.

Luxfer Holdings PLC LXFR provides heavy construction and mining services primarily in Canada. It has a beta of 0.91. The company has expected earnings growth of 42.2% for current year. The Zacks Consensus Estimate for the current year has improved by 2.1% over the last 60 days.

BJ's Restaurants Inc. BJRI owns and operates casual dining restaurants in the United States. It has a beta of 0.80. The company has expected earnings growth of 50.4% for current year. The Zacks Consensus Estimate for the current year has improved by 0.5% over the last 60 days.

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