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5 Low-Beta Stocks to Help You Sleep at Night

In times like these, you need low-beta stocks in your portfolio to help you sleep at night. Here are five that look particularly reliable right now.

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There are enough things to stress you out these days. Your investment portfolio shouldn’t be one of them. Hopefully, by now, you’ve sold out of your worst-performing stocks, and haven’t bailed on your biggest winning stocks. Perhaps you’re even looking to do some new buying, now that the market seems to be stabilizing at least a tad. But you don’t feel like taking any unnecessary risks. Reliable, low-beta stocks are the best place to turn.

Beta, as I’m sure many of you know, is a measure of a stock’s volatility. If a stock is just as volatile as the overall stock market, its beta is 1. If it’s more volatile than the market, it’s higher than 1 – anything above a 2 right now is a red flag, given that the market is already volatile enough. But if a stock’s beta is less than 1, that means it’s been less subject to the wild mood swings that have infected the market over the past six weeks.

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Those types of low-beta stocks are worth owning. You don’t have to check on them every hour, worrying that they might suddenly fall off a cliff in response to the latest horrific news headline. They won’t keep you up at night. You can buy them (I’d start with small positions), stash them away in your portfolio, and trust that they’ll hold steady through the worst of this global pandemic—and perhaps morph into steady (if unspectacular) gainers when the clouds finally part.

Here are five low-beta stocks you can trust right now, in descending order of market cap:

5 Low-Beta Stocks to Ride Out the Storm

Microsoft (MSFT)

Beta: 1.09

Year-to-Date Performance: +2%

Johnson & Johnson (JNJ)

Beta: 0.66

YTD Performance: -5.8%

Walmart (WMT)

Beta: 0.28

YTD Performance: +3.5%

Costco Wholesale Corp. (COST)

Beta: 0.75

YTD Performance: +0.75%

Gilead Sciences (GILD)

Beta: 0.69

YTD Performance: +18%

None of those should shock you. Johnson & Johnson has always been a reliable, low-beta stock, and is a Dividend Aristocrat to boot, having raised its dividend payouts for 57 years straight. It has a 2.8% yield, which is a nice cushion against the modest dip so far this year. And as a developer of medical devices, pharmaceutical equipment and essential consumer staples like baby shampoo, Band-Aids and Tylenol, Johnson & Johnson is in the right industry for a global pandemic.

Costco and Walmart are also no-brainers. Both are among the rare brick-and-mortar stores that provide essential goods right now, and people have flooded the stores of both companies to stock up on food, paper towels, toilet paper and other supplies to help sustain them through weeks of social distancing. Both companies pay dividends too, though Walmart’s is higher yielding (1.8% vs. 0.9%).

Microsoft is benefitting from essentially the entire world working, watching and playing at home. Whether it’s their personal computers, Surface Pro laptops or Xbox video game consoles used in the home, or its fast-growing Azure cloud-computing platform used by businesses for analytics, storage and virtual computing, Microsoft’s products have plenty of demand right now. As a result, MSFT stock (despite a slightly-higher-than-average beta) is up 2% so far this year.

And then there’s Gilead Sciences, the one true healthcare stock of the bunch, and the best performer by far. The company has a drug called remdesivir that was previously used to treat Ebola patients, and is now being tested on COVID-19 patients; it has already treated more than 1,700 patients with the deadly virus. That number is likely to expand substantially in the coming weeks and months, which will be huge for Gilead’s sales. Chances are, its run is far from over.

Bottom Line on Low-Beta Stocks

Uncovering stocks that can make you rich is typically the goal of any investor. But in times like these, when uncertainty is extremely elevated due to a rare global catastrophe (truth be told, only a handful of people alive have seen something like this), your main investing goal should be not to lose money. These five low-beta stocks should help mitigate big losses.

They might not make you rich in the long run. But they’re good, reliable stocks to have in your portfolio—in good times and bad.


Chris Preston is Cabot Wealth Network’s Vice President of Content and Chief Analyst of Cabot Stock of the Week.