16 Stocks That Outperform Market Fundamentally With Lower Beta

Investors are increasingly worried about lack of revenue growth in the US stock market, and investors are always seeking earnings growth.  In this time period, where questions of “topping” are more frequent, investors may be seeking lower volatility stocks, just in case things go badly — and retired investors who may be selling shares to generate household operating funds are well advised to keep portfolio volatility low.

With those thoughts in mind, we asked which companies had higher revenue growth rates (“RGR”) and higher earnings growth rates (“EGR”) than the market, but also lower Beta than the market, and also better GARP (growth at a reasonable price) attributes indicated by the PEG ratio.  We used the criteria in this table and found 30 stocks that passed the filter.


However, wanting some comfort from the careful consideration of recognized independent analysts, we reduced the list further to include only those that were rated by S&P Capital IQ and Thomson Reuters StarMine, and did not receive a rating from either below the level of Neutral. We also required that S&P Capital IQ have opined on Fair Value and did not indicate the stock was overvalued.

That knocked the list down to 16 stocks, shown in this table along with the primary filter criteria from the table above (stocks listed in alpha order by symbol).


Stocks with links to the fundamentals and valuation page at Yahoo Finance [with the EV/EBITDA in brackets]:

This table provides the yield and 5-year dividend growth rate, worst 3 months total return, and 3-year percent standard deviation (from Principia as of Oct 31).

(click image to enlarge)


These charts plot the dividend adjusted price of each of the 16 stocks divided by the same for the S&P 500 index ETF (SPY).






Some Financial Strength Comments:  

We looked at the companies in terms of financial strength through S&P Capital IQ, Value Line and Wright’s.  They were generally in agreement that all of the companies were above average strength to one degree or the other, but had conflicting views on AutoZone, Cooper and Lorillard.

  • For AutoZone Wright’s said the strength was “Limited”, Value Line said “B” which is below average, and S&P said “B+” which is average.  Moody’s credit rating is “Baa2”.
  • For Cooper Companies Wright’s and Value Line said financial strength is “A”, but S&P said below average at “B”.  Moody’s credit rating is “Ba2”.
  • For Lorillard Wright’s said the financial strength is “D” (Fair), while Value Line said “A” and S&P Capital said “A+”.  Moodys says “Baa2”.

Conflicting Year Ahead Ratings:

We cross checked the S&P Capital IQ and Thompson Reuters StarMine ratings with Timeliness ratings from Value Line.  All three were devoid of negative ratings, except for Taiwan SemiConductor, which Value Line rated 4 on their 5 point scale (where 1 is best).

Position Disclosure:

We have positions in CVS, QCOM and UNP from the list above.





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