7 stocks that even a bear could love

In an environment in which many investors appear increasingly anxious about the market's next move, a few stocks stand out as potential picks for those unenthusiastic about American equities as a group right now.

These would be the so-called low beta stocks.

Beta is frequently thought of as the measure of a stock's volatility, but that is only half of the equation. In fact, beta is the output of a simple mathematical equation that takes the product of a given stock's standard deviation and its correlation with the overall market, and divides that by the market's standard deviation.

These calculations make a stock's "beta" the easy answer to the question: How much should I expect this stock to rise (fall) for every percentage point the overall market rises (falls)?

When it comes to the seven stocks below, the answer is: Not much.

All of them have betas below 0.24, and gold giant Newmont Mining has a beta of less than 0.07, based on FactSet's analysis of the past five years of data. That means that if the S&P 500 plunges 10 percent, that broad-market drop should only contribute to a 0.7 percent slide for Newmont.

Ticker
Company
Change (YTD)
Beta (5-year)
NEM Newmont Mining 114.56% 0.07
AWK American Water Works 23.90% 0.10
HSY Hershey 11.63% 0.15
EIX Edison International 21.53% 0.20
WMT Wal-Mart Stores 16.33% 0.21
LLY Eli Lilly -7.70% 0.21
CHD Church & Dwight 17.14% 0.24

Indeed, the above names are the lowest-beta stocks in the S&P 500, once the index's smallest and most yield-sensitive names are excluded.

Newmont's low beta is easy to explain: The stock is essentially a play on gold prices, which often move inversely to the overall market.

For the others, it is easy to see that they provide products that consumers buy in good times and bad.

In contrast to the offerings of high-beta stocks like Royal Caribbean Cruises and Hewlett Packard Enterprise, Americans need water, energy and chocolate in good times and bad. Likewise for the baking soda sold by Church & Dwight, and the cancer and erectile dysfunction medications offered by Eli Lilly.

The bottom line? If you want to invest in a company that isn't liable to drop alongside the market, find one that sells products consumers will simply refuse to go without.


Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

Read more

Connect