You can read his take on the best stock to own for a correction here
I went searching among stocks in the S&P 500 (large cap stocks) and S&P 400 (mid-cap
stocks), and found 38 of them to have a beta below 1.0 and also have a price-to-earnings (P/E) ratio below 12. Even if the economy slows and earnings
growth becomes a real challenge, these low-priced stocks won't get penalized for their valuations.
Below is a table of 20 stocks that sport a beta of less than 0.7.
Here's what this list is telling me...
1. Remember Wal-Mart...
A low beta doesn't mean a stock won't budge. Shares of Wal-Mart (NYSE: WMT), which sport a beta of just 0.34, have still managed to rise more than 20% since bottoming out last summer. That's due to slightly better operating trends, especially in the retailer's grocery division.
2. Health care is seemingly safe
A number of drug and medical device companies are in this group. Companies such as Abbott Labs (NYSE: ABT), Watson Pharmaceuticals (NYSE: WPI), Amgen (Nasdaq: AMGN), Gilead Sciences (Nasdaq: GILD) and Baxter International (NYSE: BAX) all have a beta below 0.5, largely due to the fact that they have a high degree of recurring revenue and rarely tend to deliver quarterly results far from the consensus forecasts. They all trade for around 10 times earnings, which is well below the broader market's multiple, which is closer to 15.
3. Steer clear of defense and for-profit education
The list of low-beta stocks also carries a lot of defense sector and for-profit education stocks. Each of these groups faces real headwinds and may see limited (or even negative) sales growth in coming years.