With so much political and global uncertainty, it doesn’t look like this market volatility is going to cease anytime soon. And since the stock market is the best place to build a retirement portfolio overtime, it’s important to keep safety — as well as growth — in mind, suggests Nancy Zambell, editor of Wall Street's Best Investments.
With that thought, I’m focused on finding pockets of the market that hold good opportunities for each of these investment goals. And one strategy that may be worth a look is adding some low-beta stocks to your portfolio.
The definition of beta is simple — it compares the volatility, or systemic risk, of a stock to the volatility of the market. In other words, it measures a stock’s response to market swings. If a stock has a beta of 1, that means the price of that stock generally moves with the market.
Less than 1 means the stock is less volatile than the market. And more than 1 means it’s more volatile than the market. A beta of 1 indicates that the security’s price will move with the market.
A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security’s price will be more volatile than the market.
And it’s important to know that beta is a measure of systematic or market risk and doesn’t tell us anything about the specific risk of the company itself. That’s why it’s essential to use the measure as just one parameter in your overall stock analysis.
With that in mind, I ran a list of low-beta stocks, then put them through my analytic process to see which ones also exhibited the other important characteristics of a good long-term stock: growing earnings, good cash flow, reasonable debt, and investor and analyst interest.
One of my favorite results of that study is Smith & Nephew plc (SNN). It operates in the best-performing sector of the S&P 500 last year — Healthcare, which returned an average gain of 4.7%.
The company makes medical devices — primarily for hips and knees — and sells them in more than 100 countries around the world.
Some of its products include sports medicine joint repair products, arthroscopic enabling technologies such as high definition cameras, digital image capture, scopes, light sources, and monitors to assist with surgery, radio frequency, electromechanical and mechanical tissue resection devices, and hand instruments for removing damaged tissue.
Additionally, the company offers internal and external devices used in the stabilization of severe fractures and deformity correction procedures; robotics-assisted surgery, knee implant products; and hip implant products for the reconstruction of hip joints. SNN also provides advanced wound care products for the treatment and prevention of acute and chronic wounds.
For its third quarter, Smith & Nephew reported sales of $1,169 million, up 2% on a reported and 3% on an underlying basis. Its underlying revenue growth in the U.S. was 4%, and 10% in Emerging Markets. The company saw excellent growth in its Reconstruction, Sports Medicine Joint Repair and Advanced Wound Devices.
The company has paid dividends since 1937 and has a current annual yield of 1.50%. Technically and fundamentally, the shares look excellent, with bullish rankings from the company’s 15 analysts. Buy now for appreciation and steady dividend cash flow.
