The stock market is suffering a turbulent 2022 so far – and with inflation still running at a 40-year high, the Federal Reserve locked in a significant rate-hiking cycle and midterm elections just months away, it's likely the volatility is going to remain for the time being. Investors looking for a smoother market ride should consider buying low-volatility stocks as a way to manage risk.
Low-volatility strategies are designed to limit losses during periods of market decline, while still allowing for upside. Data shows they have typically outperformed the broader market indexes over the long term (opens in new tab). As one example, the S&P 500 Low Volatility Index averaged a 1.2% risk-adjusted return between 2010 and 2019, compared to a 0.9% return for the S&P 500 Index.
However, it's not a cure-all, and over shorter time frames, low-vol stocks will sometimes underperform. For instance, in 2009, the S&P 500 returned 26.5% compared to a 19.2% gain for the S&P 500 Low Volatility Index. Still, investors should look at low-volatility stocks as a way to add diversification and stability to their portfolios as part of a longer-term strategy.
One way for investors to find low-vol names is to look at beta, which measures how volatile a stock is relative to the broader market. A beta of less than 1.0 theoretically means that the name is less volatile than the S&P 500, while a beta greater than 1.0 points to a stock with more volatility.
Read on as we look at 10 low-volatility stocks to buy now. All of the names featured here boast top ratings from Wall Street pros, many pay attractive dividends and all would be worthy additions to any defensive investment portfolio.
Data is as of July 22. Average price targets and analyst ratings provided by market data tool Koyfin (opens in new tab). Stocks listed in order of beta, from highest to lowest (a lower beta means a stock is theoretically less volatile).
- Market value: $13.9 billion
- Beta (five-year monthly): 0.72
- Consensus analyst rating: Buy (14 analysts)
Leidos Holdings (LDOS (opens in new tab), $101.45) is a defense contractor that also provides civil and health solutions, says Truist Securities analyst Tobey Sommer (Buy). "Given the enduring opportunity for growth in healthcare, cyber and intelligence, we believe the company will continue to experience solid growth in the government services sector," Sommer says.
Jefferies analyst Sheila Kahyaoglu (Buy) echoes this outlook for growth. "The demand environment is better than LDOS expected in fall 2021," the analyst says, adding that on the upside scenario, she foresees revenue growing "7% organically in 2023 due to new wins and ramping contracts across Civil, Defense, and Health." Kahyaoglu also has Leidos as her top stock pick in IT services.
What's more, the company is currently "on track to generate more than a billion dollars of operating cash flow this year," said Roger Krone, CEO of Leidos, on the company's first-quarter earnings call. This would be comparable to its cash from operations for the last two fiscal years.
However, Christopher Cage, chief financial officer at Leidos, went on to say during that same earnings call, that, per the company's "usual pattern," he expects "the lion's share of operating cash flow will be generated in the back half of the year."
Even though LDOS is one of the best low-volatility stocks to buy, Koyfin-surveyed analysts still foresee a 12-return potential of nearly 17%. Of the 14 analysts surveyed by Koyfin, two consider the defense stock a Strong Buy, seven say it's a Buy and five have it at Hold. That's enough for Koyfin to consider the company an overall Buy.
- Market value: $17.9 billion
- Beta: 0.66
- Consensus analyst rating: Buy (19 analysts)
In May 2022, biopharmaceutical company Incyte (INCY (opens in new tab), $80.90) made headlines after the Food and Drug Administration (FDA) approved Olumiant – its COVID-19 treatment co-developed with Eli Lilly (LLY (opens in new tab)). The prescription drug is a Janus kinase (JAK) inhibitor, which can assist patients needing respiratory support.
Incyte "has a strong pipeline of late-stage programs and partnerships," says Argus Research analyst Jasper Hellweg (Buy). In his view, this gives INCY stock "significant room to advance."
Along similar lines, Hervé Hoppenot, CEO of Incyte, said on the company's first-quarter earnings call that "made progress across all stages of our pipeline" over the three-month period. On the call, Chief Financial Officer Christiana Stamoulis went on to say that INCY's "financial position continues to be strong as we ended the quarter with $2.5 billion in cash and marketable securities."
Additionally, revenue grew 15.2% year-over-year in Q1. That's on top of the 12.0% and 23.6% growth in fiscal 2021 and 2020, respectively.
Koyfin-surveyed analysts foresee 15.3% upside for INCY over the next 12 months. Of the 18 analysts surveyed by Koyfin, four rate the healthcare stock a Strong Buy, eight have it at Buy, six call it a Hold and one has it at Strong Sell. This is enough for Koyfin to consider Incyte an overall Buy. Plus, INCY is one of the best low-volatility stocks around, with a five-year monthly beta of 0.66.
- Market value: $9.1 billion
- Beta: 0.64
- Consensus analyst rating: Buy (25 analysts)
Pharmaceutical company Neurocrine Bioscience (NBIX (opens in new tab), $95.29) appears to have hit it big with its Ingrezza product offering. Ingrezza can be used to treat tardive dyskinesia (TD), a condition characterized by involuntary movements of the face, tongue and other body parts. It's often brought on by prolonged use of certain antipsychotic medications.
Ingrezza currently has patent protection through 2029, says Jefferies analyst Akash Tewari (Buy). However, Tewari expects an extension on that IP protection until 2031, which could create an additional $2 billion in free cash flow for NBIX.
Meanwhile, "Ingrezza sales impressed in the first quarter with $303 million, reflecting 6.5% sequential volume growth vs. 4.0%" for competitor Teva Pharmaceutical Industries' (TEVA (opens in new tab)) Austedo offering, says Oppenheimer analyst Jay Olson. He has an Outperform rating on the low-vol stock, which is the equivalent of a Buy.
Overall, NBIX saw 15.5% year-over-year revenue growth in Q1.
During the company's first-quarter earnings call, Chief Commercial Officer Eric Benevich said he is "awed by what our team has been able to achieve in these past five years." Additionally, he is "humbled by the scope of what we aim to accomplish in the years ahead as we improve the lives of the many thousands of patients still suffering from TD."
Of the 25 analysts surveyed by Koyfin, five rate NBIX stock a Strong Buy, eleven call it a Buy, eight believe it's a Hold and one deems it a Strong Sell. Overall, that's enough for Koyfin to consider NBIX a Buy.
- Market value: $267.0 billion
- Beta: 0.56
- Consensus analyst rating: Buy (25 analysts)
Not only is Coca-Cola (KO (opens in new tab), $61.59) a mainstay of American culture, but it's also one of the safest investments out there for investors – just ask Warren Buffett. KO has been an iconic member of the Berkshire Hathaway equity portfolio for 35 years. And with a beta of only 0.56, KO is among the best low-volatility stocks to be found.
"We believe that high-quality stocks, like Coke, play an important role in portfolio construction," says Argus Research analyst Chris Graja (Buy). In addition to its historical performance, Graja foresees Coke performing even better as the pandemic continues to fade.
Wells Fargo analyst Christopher Carey (Overweight, equivalent of Buy) echoes this sentiment. With regard to current macro concerns, KO should be a "beneficiary of pricing without as negative an impact from inflation," he says.
And there are plenty of bulls to be found in Coca-Cola's corner, with Morgan Stanley analyst Dara Mohsenian (Overweight) naming KO as a preferred stock "due to stronger pricing power and higher secular topline growth."
In fact, Koyfin-surveyed analysts are targeting nearly 14% upside for KO over the next 12 months. Of the 25 analysts surveyed by Koyfin, six rate the stock a Strong Buy, 12 say Buy, seven have it at Hold and one deems it a Strong Sell. This is enough for Koyfin to consider KO an overall Buy.
KO is also one of the best stocks for income investors, with the Dividend Aristocrat currently yielding 2.9%.
- Market value: $9.2 billion
- Beta: 0.55
- Consensus analyst rating: Strong Buy (7 analysts)
Founded all the way back in 1892, Assurant (AIZ (opens in new tab), $169.74) provides lifestyle and housing insurance solutions for a global marketplace. The company's Global Lifestyle segment covers warranties and insurance on mobile devices and vehicles among other things, while its Global Housing division provides customers with homeowners, renters and flood insurance.
Assurant's "diverse businesses provide an attractive combination of steady growth, strong free cash flows and limited risk," says KBW analyst Thomas McJoynt-Griffith (Outperform). He expects "the company to continue investing in its repair/trade-in/upgrade capabilities," and this should help AIZ "generate strong, stable margins and returns across the various business lines."
In addition, "Assurant continues to be well insulated from inflation and supply-chain issues given its service orientation and low-risk profile," says William Blair analyst Jeff Schmitt. He adds that the low-vol stock remains a top pick at William Blair.
Management is also upbeat about the future. Following a solid Q1 performance in which adjusted earnings per share were up 17% year-over-year, CEO Keith Demmings said he is "confident" in the company's "ability to continue to expand earnings and cash flows." This will allow AIZ to continue investing "in our businesses and sustain our track record of returning excess capital to shareholders over the long term."
And a five-year monthly beta of 0.55 shows AIZ has been among Wall Street's low-volatility stocks for some time.
Over the next 12 months, Koyfin-surveyed analysts are targeting 21.6% upside for Assurant. And of the seven analysts chiming in on the stock, two say it's a Strong Buy, four have it at Buy and one says Hold – good enough for an overall Strong Buy rating at Koyfin.
- Market value: $72.4 billion
- Beta: 0.49
- Consensus analyst rating: Buy (28 analysts)
Vertex Pharmaceuticals (VRTX (opens in new tab), $283.11) makes therapies for treating cystic fibrosis (CF), a genetic disease affecting the lungs and causes increased difficulty in breathing over time.
Finding treatments for such a devastating illness is extremely important research. And in June 2021, VRTX received approval from the FDA for the first-ever CF treatment for children aged 6 to 11.
Not only has this been a watershed moment for CF treatment, but it's also brought a great deal of investor attention to Vertex Pharmaceuticals. The company is "now able to treat most of the 80,000 cystic fibrosis patients in North America, Europe, and Australia," says Argus Research analyst Jasper Hellweg (Buy). Plus, "management believes that it could treat up to 90% of all people with CF if it receives approval for expanded indications."
And Jefferies analyst Mike Yee sees "VRTX as the cleanest large-cap biotech growth story out there." While Yee admits that the broader market doesn't currently seem interested in growth stocks, he believes "VRTX is a relatively safe play." Indeed, with a five-year monthly beta of 0.49, Vertex is one of the best low-volatility stocks around.
Additionally, VRTX is "more attractive than peers by benefiting from a high margin and highly profitable cystic fibrosis base business," Yee says, which makes the stock "relatively insulated from recessions."
Of the 28 analysts surveyed by Koyfin, seven have it at Strong Buy, 11 call it a Buy and 10 believe it's a Hold. That works out to an overall Buy rating.
- Market value: $166.0 billion
- Beta: 0.47
- Consensus analyst rating: Strong Buy (32 analysts)
T-Mobile US (TMUS (opens in new tab), $132.48) is the third-largest telecom company in the U.S. by market cap, but it's Morgan Stanley analysts Simon Flannery's (Overweight) top pick in the industry. This is over larger companies like Verizon (VZ (opens in new tab)) and Comcast (CMCSA (opens in new tab)), as well as older firms such as AT&T (T (opens in new tab)), which ranks number four in market cap for U.S. telecoms.
Flannery likes TMUS for three reasons in particular. First, he sees "the stock offering a solid topline growth story." Second, he says TMUS should see "expanding margins and free cash flow from merger synergies." And third, the company has "a $60 billion capital return program in prospect."
In addition, while "costs are creeping up, TMUS, unlike peers AT&T and Verizon, feels insulated from inflationary pressures and sees no need to raise base rates," says Wells Fargo analyst Eric Luebchow. This should help TMUS remain competitive, especially since current inflation rates are the highest they've been since 1981.
Also helping on the competition front is T-Mobile's recent announcement that it is bringing its 5G home internet offerings to five additional states, which adds up to 81 more cities and towns and over 5 million homes.
Analysts surveyed by Koyfin are projecting 27.4% upside potential over the next 12 months for T-Mobile, which is also one of the best stocks for a bear market. And of the 32 pros following TMUS, 10 call it a Strong Buy, 20 say Buy, 1 has it at Hold and 1 says Sell. That's enough for a consensus Strong Buy rating.
- Market value: $312.4 billion
- Beta: 0.37
- Consensus analyst rating: Buy (23 analysts)
Eli Lilly (LLY (opens in new tab), $328.75) was founded in 1876, and while the company didn't go public until 1952, it has been a mainstay of the Fortune 500 ever since the list was first created in 1955.
Today, the company is still a great investment, especially for investors seeking out the best low-volatility stocks during times of market downturns. LLY has a five-year monthly beta of 0.37 – one of the lowest on this list.
Mizuho analyst Vamil Divan (Buy) continues to see Eli Lilly as a top pick among large caps. "We were impressed by the top-line tirzepatide data when released in late April and increased our tirzepatide sales estimates and LLY price target as a result," Divan writes in a note. "After seeing the full data from the study, we are even more convinced by tirzepatide's transformative potential, and see it continuing to drive upside in LLY shares."
Tirzepatide – Eli Lilly's Type 2 diabetes drug sold under the brand name Mounjaro – was mentioned by CEO David Ricks during the company's first-quarter earnings call as being one catalyst for the "strong start" seen so far in 2022. Ricks pointed to "volume-driven revenue growth led by our key products" as another.
The executive went on to say that in addition to the new products coming out of LLY's pipeline, the company "delivered solid sales growth [in Q1], driven largely by volume from our key growth products, which represents 61% of our core business."
These strong fundamentals are being noticed by the bulk of Wall Street pros following LLY. Of the 23 analysts surveyed by Koyfin, five consider LLY a Strong Buy, 10 say it's a Buy, seven have it at Hold and one believes it's a Strong Sell. This is enough for Koyfin to consider LLY an overall Buy.
- Market value: $6.3 billion
- Beta: 0.37
- Consensus analyst rating: Strong Buy (2 analysts)
FTI Consulting (FCN (opens in new tab), $182.05) is a Washington, D.C.-based business consulting firm that was founded in 1982. The company currently operates in five different segments, covering everything from corporate finance and restructuring to technology and strategic communications.
The company boasts a "diversified business mix, defensive nature and strong long-term earnings power," says William Blair analyst Andrew Nicholas (Outperform). For these reasons, FCN is one of the analyst's "favorite specialty consulting names under coverage."
What's more, "FTI Consulting offers investors a way to play both offense and defense in the current environment," Nicholas adds, due in part to recent rebounds "in bankruptcy volumes (with rising interest rates as a possible catalyst) or a continuation of strong large M&A activity, antitrust enforcement, and pent-up demand for litigation services."
In addition to being one of Wall Street's best low-volatility stocks, the company "generates excellent free cash flow and our balance sheet is very strong," said Ajay Sabherwal, chief financial officer of FTI Consulting, on the first-quarter earnings call. "We have the capacity to continue to boost shareholder value through organic growth, share buybacks and acquisitions when we see the right ones."
Analysts see plenty of reasons to be optimistic toward the mid-cap stock, including its momentum. Indeed, shares are up 18.7% for the year-to-date, compared to a 16.9% loss for the S&P 500 over that same time frame. The stock boasts a consensus Strong Buy rating at Koyfin.
Grocery Outlet Holding
- Market value: $4.3 billion
- Beta: -0.28
- Consensus analyst rating: Buy (14 analysts)
Grocery Outlet Holding (GO (opens in new tab), $44.20) has a negative beta, meaning it shouldn't just be less volatile than the overall market, but it should theoretically go up when the market's going down. And that's precisely what is happening in 2022.
Specifically, while the S&P 500 is currently down 16.9% for the year-to-date, GO is up 57.4%.
GO has been in business since 1946, and operates independent grocery stores across the U.S.
There is plenty of "potential for earnings per share upside supported by a compounding inflationary environment and increasingly value-focused consumers," says Deutsche Bank analyst Krisztina Katai(Buy). In fact, Katai believes GO could "be one of the fastest growing concepts in retail."
Management is "extremely pleased with the momentum in our business," said CEO Eric Lindberg during the Grocery Outlet's first-quarter earnings call, with the company continuing "to make progress on our strategic growth initiatives." Lindberg believes GO is "stronger and better positioned today than at any other time in our history."
Analysts agree. Of the 12 surveyed by Koyfin, one rates GO a Strong Buy, five say it's a Buy and six have it at Hold. This is enough for Koyfin to consider GO an overall Buy.
Michael Adams's financial writing career has spanned roles with KCI Communications, The Motley Fool, InvestorPlace, InvestingDaily and other major financial publishing outlets. Michael’s personal investing style is based on a buy-and-hold approach of primarily up-and-coming tech businesses. He uses fundamental analysis to find great companies with the possibility for tremendous growth over the course of years.
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