Investing is about balancing risk and reward. That's why regardless of market conditions, many investors with a low-risk tolerance choose to invest in low beta stocks. Beta is a measurement of volatility between two assets. For stock investors this means how an individual stock compares to an index that it tracks.
For example: How does the performance of The Coca-Cola Company (NYSE: KO) compare to the performance of the S&P 500 index? A beta below 1.0 is considered a low. It also means that investors should expect that stock, in general, to be less volatile than the S&P 500 index.
But what does less volatile really mean? Basically, it means you can expect lower highs compared to the broader market but also higher lows. Simply put, the stock may not outperform a high-beta stock, but it will have higher lows on a percentage basis in a market sell-off.
In this special presentation, we analyze seven low-beta stocks that risk-averse investors may want to consider as the market continues to struggle with volatility.
Quick Links
- Exxon Mobil
- Regeneron Pharmaceuticals
- AbbVie
- General Mills
- Sturm, Ruger & Company
- Intuitive Machines
- Global Self Storage
#1 - Exxon Mobil (NYSE:XOM)
Oil stocks are cyclical stocks. They also tend to be low beta stocks. And when you have the chance to buy a quality stock like Exxon Mobil Corp. (NYSE: XOM) that’s still down about 4.75% in the last 12 months, it’s worth a close look.
Analysts have been expecting oil prices to rally for over a year. A number of factors have contributed to the price of a barrel of crude dropping below $70. But there are reasons to believe that oil prices are ready to move higher.
First, lower interest rates are likely to stimulate demand, as a weaker dollar will have a bullish effect on the price of oil. Exxon Mobil has attractive assets in Guyana and the Permian Basin, keeping it in a position to capitalize on those higher prices.
In addition to being a low beta stock, XOM stock trades at an attractive 13.3x forward earnings and pays a dividend that currently offers a 3.38% yield. Exxon Mobil is also a dividend aristocrat that has increased its payout for 41 consecutive years.
About Exxon Mobil
Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas in the United States and internationally. It operates through Upstream, Energy Products, Chemical Products, and Specialty Products segments. The Upstream segment explores for and produces crude oil and natural gas.
Read More - Current Price
- $120.66
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 8 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $129.95 (7.7% Upside)
#2 - Regeneron Pharmaceuticals (NASDAQ:REGN)
With a forward P/E ratio of over 30x, Regeneron Pharmaceuticals Inc. (NASDAQ: REGN) presents concerns about valuation that may weigh more heavily on investors’ minds than its beta of just 0.12. However, it’s worth noting that Regeneron is the largest holding in The iShares Biotechnology ETF (NASDAQ: IBB).
That's not without reason. Regeneron has two blockbuster drugs that contribute to the bottom line. First is Dupixent which it shares the rights to with Sanofi (NASDAQ: SNY). Dupixent generated $11.6 billion in sales in 2023, and Regeneron just reported positive results in two Phase 3 trials that will allow the drug to be used for chronic obstructive pulmonary disease (COPD). Analysts believe that could contribute $3.5 billion to revenue on the low end.
The company also has Eylea, a treatment for wet age-related macular degeneration, which it shares the rights to with Bayer. The significance to investors is that the company is approved for a high-dose formulation that has allowed it to offset competition with biosimilar offerings.
About Regeneron Pharmaceuticals
Regeneron Pharmaceuticals, Inc discovers, invents, develops, manufactures, and commercializes medicines for treating various diseases worldwide. The company's products include EYLEA injection to treat wet age-related macular degeneration and diabetic macular edema; myopic choroidal neovascularization; diabetic retinopathy; neovascular glaucoma; and retinopathy of prematurity.
Read More - Current Price
- $796.58
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 17 Buy Ratings, 4 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $1,097.14 (37.7% Upside)
#3 - AbbVie (NYSE:ABBV)
If investors are looking for a more reasonably valued pharmaceutical stock, AbbVie Inc. (NYSE: ABBV) is one to consider. ABBV stock has a forward P/E of around 17x, which correlates well with the anticipated 11.79% earnings growth in the next 12 months.
AbbVie's flagship drug, Humira, is used to treat rheumatoid and psoriatic arthritis. Concerns about biosimilar competition are real, but the company planned for this well in advance. And its Skyrizi and Rinvoq are showing signs of offsetting revenue decline from Humira.
AbbVie is also a good example of why investors don’t have to compromise growth with a low beta stock. The company has delivered a total return of over 435% in the last 10 years. That’s nearly double that of Regeneron. Plus, AbbVie is a dividend king that has increased its dividend for 52 consecutive years with a current yield of 3.18%. A rock-solid balance sheet means that dividend is not at risk.
About AbbVie
AbbVie Inc discovers, develops, manufactures, and sells pharmaceuticals worldwide. The company offers Humira, an injection for autoimmune and intestinal Behçet's diseases, and pyoderma gangrenosum; Skyrizi to treat moderate to severe plaque psoriasis, psoriatic disease, and Crohn's disease; Rinvoq to treat rheumatoid and psoriatic arthritis, ankylosing spondylitis, atopic dermatitis, axial spondyloarthropathy, ulcerative colitis, and Crohn's disease; Imbruvica for the treatment of adult patients with blood cancers; Epkinly to treat lymphoma; Elahere to treat cancer; and Venclexta/Venclyxto to treat blood cancers.
Read More - Current Price
- $170.98
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 17 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $203.83 (19.2% Upside)
#4 - General Mills (NYSE:GIS)
General Mills Inc. (NYSE: GIS) is a boring but beautiful stock for fans of low beta stocks. In the past five years, GIS has delivered a total return (that includes its dividend) of 60.74%. That’s an average of just over 12% a year. That’s solid, but it’s not going to be confused with a high-flying tech stock.
As part of the consumer staples sector, General Mills is affected by inflation's impact on the consumer. In 2022 and the first half of 2023, the company was able to pass along some of its higher costs. However, the company has been facing tougher comparisons as consumers are turning more to private-label brands.
Those should be short-term concerns. The company is the home of many iconic brands. And at around 16x forward earnings, GIS stock trades at a discount to consumer staples stocks. Plus, investors are getting an attractive dividend with a 3.19% yield, and the company recently increased that dividend for the 39th consecutive year.
About General Mills
General Mills, Inc manufactures and markets branded consumer foods worldwide. The company operates through four segments: North America Retail; International; Pet; and North America Foodservice. It offers grain, ready-to-eat cereals, refrigerated yogurt, soup, meal kits, refrigerated and frozen dough products, dessert and baking mixes, bakery flour, frozen pizza and pizza snacks, snack bars, fruit and savory snacks, ice cream and frozen desserts, unbaked and fully baked frozen dough products, frozen hot snacks, ethnic meals, side dish mixes, frozen breakfast and entrees, nutrition bars, and frozen and shelf-stable vegetables.
Read More - Current Price
- $65.12
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 12 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $73.00 (12.1% Upside)
#5 - Sturm, Ruger & Company (NYSE:RGR)
Sturm, Ruger & Company Inc. (NYSE: RGR) is one of the worst-performing stocks on this list of low beta stocks. RGR stock is down 8.9% in 2024 and 17.5% in the last 12 months. It’s also trading near its 52-week low.
Practitioners of technical analysis will remark that the stock appears to have formed a bottom. That explains the what could happen, but why might the stock be ready to rebound?
Sturm, Ruger & Company manufactures and sells firearms. In fact, it’s the largest firearms manufacturer in the United States. Statistics aside, the lived experience of many Americans suggests that firearm sales are likely to increase. To date, 2024 firearm sales closely approximate that of 2023, but they could increase, particularly if consumers believe gun laws may become more restrictive.
RGR stock is also attractively valued at just 18x forward earnings, which is below the 24x average of consumer discretionary stocks.
About Sturm, Ruger & Company, Inc.
Sturm, Ruger & Company, Inc, together with its subsidiaries, designs, manufactures, and sells firearms under the Ruger name and trademark in the United States. The company operates through two segments: Firearms and Castings. It provides single-shot, autoloading, bolt-action, and modern sporting rifles; rimfire and centerfire autoloading pistols; single-action and double-action revolvers; and firearms accessories and replacement parts, as well as manufactures lever-action rifles under the Marlin name and trademark.
Read More - Current Price
- $38.79
- Consensus Rating
- Strong Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#6 - Intuitive Machines (NASDAQ:LUNR)
Low beta stocks are known as low risk stocks. But low risk doesn’t mean no risk. Intuitive Machines Inc. (NASDAQ: LUNR) is a good example of this. The company is part of the emerging space economy, and investors are very excited about this sector. LUNR stock is up 126% in 2024.
Intuitive Machines made headlines when its lunar lander reached the moon’s surface in February 2024. Since then, the company has secured contracts for future missions. The concern for investors is cash burn. The company is not yet profitable and current projections suggest that there may be a share issuance coming in the next 12 months.
There’s no guarantee that will happen. But with the company not forecasting becoming profitable until 2026, it’s not something to bet against. That makes this a speculative buy. But, if you’re looking for a low beta stock that may provide significant upside, LUNR stock may be one to watch.
About Intuitive Machines
Intuitive Machines, Inc designs, manufactures, and operates space products and services in the United States. Its space systems and space infrastructure enable scientific and human exploration and utilization of lunar resources to support sustainable human presence on the moon. The company offers lunar access services, such µNova, lunar surface rover services, fixed lunar surface services, lunar orbit delivery services, rideshare delivery services to lunar orbit, as well as content sales and marketing sponsorships; and orbital services, including satellite delivery and rideshare, satellite servicing and refueling, space station servicing, satellite repositioning, and orbital debris removal.
Read More - Current Price
- $10.65
- Consensus Rating
- Buy
- Ratings Breakdown
- 5 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $10.60 (0.5% Downside)
#7 - Global Self Storage (NASDAQ:SELF)
There’s been a global surge in public self-storage and Global Self Storage (NASDAQ: SELF) is a name to watch in this space. SELF stock has delivered a total return of approximately 42%, and the stock is up more than 11% in 2024.
The self-storage industry is booming for a couple of reasons. On the residential side, many homeowners and renters are looking to downsize and need a cost-effective alternative to store the stuff that will no longer fit. On the commercial side, many businesses have come to realize that public storage units can be an alternative to more costly warehouse space.
Investors should take note that Global Self Storage which operates as a real estate investment trust (REIT) has been the target of several unsolicited acquisition proposals in the past several years. However, management continues to rebuff these offers and, for now, the company will remain a publicly traded company.
About Global Self Storage
Global Self Storage is a self-administered and self-managed REIT that owns, operates, manages, acquires, and redevelops self-storage properties. The company's self-storage properties are designed to offer affordable, easily accessible and secure storage space for residential and commercial customers.
Read More - Current Price
- $5.14
- Consensus Rating
- Buy
- Ratings Breakdown
- 1 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $6.50 (26.5% Upside)
If you're in retirement or near retirement age, low beta stocks can work well because their defensive nature prioritizes capital preservation. However, the average return of the S&P 500 index is 10%. The potential downside to investing in low beta stocks is that in not providing a market-beating return, they may not keep you ahead of inflation in volatile markets.
But that doesn't account for dividends. Many low beta stocks offer safe, growing dividends. These can add to your total return and provide the benefit of compounding as you hold the stock over time.
Another point to remember about beta is that it's a dynamic number. Like a company's market capitalization or its price-to-earnings (P/E) ratio, it's always moving. This brings up another aspect of a stock's beta. It's backward-looking. And while it tends to be an accurate measurement, it's not foolproof.
There is a formula for calculating beta, but you don't have to know it. MarketBeat provides the beta value for an individual stock on its low beta stock page on Marketbeat.com.
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