We all know the feeling. You hear the rumble of the mail truck, and after it trundles away, you open your mailbox to find one of the big envelopes. It's too tall to be a bill, and too fat to be a birthday card. Congratulations! It's the quarterly portfolio statement from your broker!
But if you open it, you might find bad news.
Wouldn't it be great, though, to know in your heart that the news won't be too bad? To feel confident that, even if the market is down, your stocks probably didn't go down as much as everyone else's did?
To help you achieve this kind of confidence, we've put together a stock screen and tasked it with finding stocks possessing three attributes that may ease your fears over checking your portfolio:
- Reasonably large, established companies with recognizable brand names (i.e. no "penny stocks").
- Stocks that don't zig and zag with every wobble in the stock market, showing a beta of less than 1.0.
- Companies that don't cost a lot -- at least 20% cheaper than the stock market's 25.4 P/E ratio.
What follows, I think, are three stocks that fit the bill. Go ahead -- read on and see if you agree.
Valued at $9.3 billion in market capitalization, Mobile TeleSystems (MTS) is far and away the largest stock we'll be looking at today. MTS generates $7.7 billion in annual sales and earns an 11.1% net profit margin on those sales -- $860 million last year. It also does a good job of sharing that wealth with its share holders. According to data from S&P Global Market Intelligence, MTS's annual dividend yield is 10.3% -- nearly five times the average 2.1% dividend yield of U.S. companies on the S&P 500, and twice what more familiar telecoms like AT&T and Verizon are paying.
Priced at just 10.8 times earnings, Mobile TeleSystems stock is also less than half as expensive as the average S&P stock. Yet despite the cheap price, MTS stock sports a beta of 0.97, which is slightly less volatile than the average stock. That fact may lend an investor confidence that MTS stock will perform better in declining markets than other stocks might. At the same time, analysts see a good chance that MTS will grow nicely in expanding markets -- its projected growth rate on S&P Global is a very respectable 9.2%.
American Outdoor Brands
Our second stock name today has no dividend -- but a record of stability even better than that of Mobile TeleSystems. If MTS is less volatile than average with its 0.97 beta, then American Outdoor Brands (NASDAQ:SWBI) should be downright sedentary with a beta of 0.17 -- five times below the average. It's also one heck of a cheap stock.
Priced at just $1.3 billion in total market cap, American Outdoor Brands -- the company formerly known as Smith & Wesson -- costs less than 10 times earnings today. Why so cheap? The stock has taken a short-term hit this year as investors adjusted their expectations to the fact that Hillary Clinton is not going to be President, and that gun regulation does not look imminent. That removes a certain sense of urgency that has, in past changes of administration, incentivized gun aficionados to rush out and stock up on guns 'n' ammo "just in case."
But this doesn't mean that American Outdoor Brands won't grow in future years. In fact, analysts who follow the stock are pretty sure the company can maintain earnings growth rates close to 14% over the next five years -- a fact that makes the stock's sub-10 price-to-earnings (P/E) ratio look very cheap indeed.
Safety Insurance Group
Last but not least, we'll end with a company whose name promises the embodiment of a "safe" stock -- Safety Insurance Group (NASDAQ:SAFT).
This provider of home and auto insurance sports a nice, round, $1 billion market capitalization that's just a bit larger than its $825 million in annual revenues. With $64 million in trailing profit, it sells for a very reasonable 16 times earnings -- 37% cheaper than the average stock on the S&P 500. It's also a very reliable profits generator.
Over the past five years, S&P Global data shows that Safety Insurance tends to report about $4 a year in profits, sometimes a bit more, sometimes a bit less (once, a lot less -- Safety lost $0.93 in 2015, but quickly bounced back again in 2016.) The stock's 0.76 beta shows that it has historically been a steadier performer than most other stocks, as well, which may indicate that investors like the company's steady performance.
One imagines that Safety Insurance Group's large dividend is also attractive to investors. At 4.2%, Safety stock yields twice the market average. Analysts who follow the stock expect to see Safety report $4 a share again this year, and grow that to $4.15 in 2018. Whether it accomplishes this or not, though, Safety's big fat dividend yield should certainly make you smile when you open your next portfolio statement.