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Stock Screen: Low-Beta Beauties


S&P's latest list finds top-ranked stocks that tend to be less volatile than the broader market. Among them: Genentech, PepsiCo, and Wal-Mart

The risk metric known as beta can be a useful investment criterion during these times of market volatility.

An issue with a beta of 1.5, for example, tends to move 50% more than the total market in the same direction. An issue with a beta of 0.5 tends to move 50% less. If a stock or stock fund moved exactly as the market moved, it would have a beta of 1.0. Thus, high beta is typical of a volatile stock, while a low beta is typical of a stock that moves less than the market as a whole. A stock with a negative beta moves in the direction opposite to that of the market. With a beta of -1.0, a stock has the same volatility as the market, but tends to rise when the market falls, and vice versa.

Stock fund betas are calculated once a month using 36 months of return data.

S&P's stock betas are computed by Standard & Poor's Compustat Services and are available for all U.S. stocks for which a five-year trading history has been compiled. Sixty month-end prices are used for the calculations, which are un-levered (that is, not smoothed to eliminate any sharp, sudden changes). Dividends paid are included in S&P's beta calculations. The S&P 500-stock index is used as a proxy for the market as a whole.

Even though 60 data points are used, extreme price volatility over a few months within the five-year time span may occasionally distort a beta calculation. Special events, such as takeovers, will obviously affect results.

Considering the overall market's performance over the past three years, we screened for four- and five-STARS stocks with negative betas (suggesting inverse performance) or a positive beta of 0.25 or lower. Sixteen stocks made the cut.

Company/S&P STARS Rank

Abbott Laboratories (ABT)/5 STARS

Associated Banc-Corp (ASBC)/4 STARS

BB&T Corp. (BBT)/4 STARS

Celgene (CELG)/5 STARS

Genentech (DNA)/4 STARS

General Mills (GIS)/5 STARS

J. Crew (JCG)/4 STARS

Kinder Morgan Energy (KMP)/5 STARS

NuStar Energy (NS)/4 STARS

OSI Pharmaceuticals (OSIP)/4 STARS

Owens & Minor (OMI)/4 STARS

PepsiCo (PEP)/4 STARS

Southwest Airlines (LUV)/4 STARS

Wal-Mart Stores (WMT)/5 STARS

Wells Fargo (WFC)/4 STARS

Zions Bancorporation (ZION)/4 STARS

Piskora is managing editor of U.S. Editorial Operations for Standard Poor's .

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