Low Risk, High Rating

S&P's latest screen turned up 19 stocks -- each with its top investment ranking -- that are less volatile than the S&P 500

By Numer de Guia

One of the most important things to consider in deciding to purchase a stock is the issue's price volatility compared to that of the overall market. That's because volatility can be a good indication of a stock's inherent degree of risk. One widely used measure of a particular stock's volatility in relation to the market is called its beta. And it's a useful tool for investors.

Here's how it works. The S&P 500 is used as a proxy for the entire market and is thus assigned a beta of 1.0. An issue with a beta higher than that -- say 1.5 -- tends to move in the same direction 50% more than the total market does. 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.

The upshot: Stocks with a beta lower than 1.0 tend to carry less risk. So for investors with a lower risk tolerance, choosing a low-beta stock makes sense. With that in mind, we put together out latest stock screen. We searched for issues with betas of no more than 0.80, indicating that they're less risky than the S&P 500.

We then used two other filters. First, all the stocks are expected to pay dividends this year. And finally, each one had to carry S&P's highest investment ranking, 5 STARS (buy), indicating that our analysts think they'll outperform the market over the next 6 to 12 months. These 19 stocks passed the test:

Biomet (BMET )

Boeing (BA )

Commerce Bancorp (CBH )

Dover (DOV )

Eaton Vance (EV )

ExxonMobil (XOM )

Fortune Brands (FO )

Arthur J. Gallagher (AJG )

IMC Global (IGL )

JLG Industries (JLG )

Johnson & Johnson (JNJ )

Kinder Morgan (KMI )

National Commerce Financial (NCF )

Newell Rubbermaid (NWL )

PepsiCo (PEP )

Regis (RGIS )

Sears (S )


Wilmington Trust (WL )

De Guia is a portfolio services analyst for Standard & Poor's

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