Seeking lower-volatility U.S. consumer stocks

Monday, April 3, 2017

What are we looking for?

U.S. consumer sector stocks with strong fundamentals and below-average volatility.With U.S. markets now running within a few percentage points off their record highs, many investors have become con-cerned with the durability of the bull market now entering its ninth year. Sectors such as consumer goods are typically subject to less volatility than other sectors and have the benefit of being defensive in the event of a market downturn. In addition, these stocks often offer above average dividends.


The screen

We will be using Recognia Strate-gy Builder to search for U.S. con-sumer stocks with low volatility, strong dividends and reasonable valuations.We begin by setting a minimum market capitalization threshold of $10-billion (U.S.) to focus on larger, more established companies in the sector. To ensure we don’t overpay for our invest-ments we will select stocks with forward price-to-earnings ratios of 27 or less. Next, we will look for companies that have a dividend of at least 2 per cent and a year-over-year dividend growth rate of 4 per cent or more.

Finally, in order to focus on stocks that demonstrate low vol-atility, we will screen for stocks with a beta of between 0 and 0.75. Beta is a measure of stock price volatility. A beta in this range means that the stock has 75 per cent or less of the volatil-ity of the overall market... Read full article here