Zacks Investment Ideas Feature Highlights: Sturm, Ruger & Company, Randgold Resources and Consolidated Edison

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Aug 19, 2011, 09:30 ET

CHICAGO, Aug. 19, 2011 /PRNewswire/ -- Today, Zacks Investment Ideas feature highlights Features: Sturm, Ruger & Company (NYSE: RGR), Randgold Resources (Nasdaq: GOLD) and Consolidated Edison (NYSE: ED).

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3 Stocks Defying Volatility

Many investors spend a good chunk of their day asking or answering one question; Is the market going up or down? And if you ask 2 people you will probably get 3 answers.

While this practice is as old as investing itself, I often wonder why we bother. No matter your methods or experience, all we can really do is flip a coin.

We do this over and over and usually end up even, at best. But what if there was a way to cut that out? Well there is and it lies within a stock's beta.

A Quick Lesson on Beta

While stocks with betas near zero, by definition, miss out on some upside when the market rises, but they avoid the dramatic dips that hit most others. Beta is calculated by comparing percentage changes in a company's stock compared to the percentage changes in the market for a given period of time.

For example, a stock with a beta of 0.5 has experienced swings half as much as the market, on average. If the market climbs 10%, the stock only gained 5%, but it works coming down as well. When the market dropped 10%, shares only lost 5%.

Market Neutral

I am not a fan of timing the market, but I will go as far as trying to mitigate its impact for risk management. Right now we seem to be at a great point for neutralizing that particular risk.

Half of the articles I have read over the past month have said we are headed for a double-dip recession and half said this is just a correction.

Why guess? Why not buy good stocks, with a low beta and ignore all of that noise. Here are 3 stocks with a minimal beta over the past 5 years and the added potential of a Zacks #1 Rank (Strong Buy).

Sturm, Ruger & Company (NYSE: RGR) has been able to avoid the markets slump, actually posting roughly a 25% gain over the past month.

RGR is a Zacks #1 Rank (Strong Buy) that mainly makes a variety of firearms and replacement parts. Its beta is just coming in at 0.1.

Full-year estimates have jumped in the past month and are now averaging $1.65, up from $1.45. Next year's consensus is up 30 cents, to $1.81. This puts growth rates at a steady 13% and 10%, respectively.

Much of this optimism is from the recent earnings surprise. RGR reported on Jul 27 and said sales were up 24% to $79.6 million. Earnings per share came in at $0.56 for a 14-cent surprise.

Part of what gives RGR such a steady performance is its excellent earnings history. The company has topped expectations in 10 of the past 11 quarters. Also, they pay out a 2% dividend.

Randgold Resources (Nasdaq: GOLD) managed to push higher in the past 4 weeks as well. This is a Zacks #1 Rank (Strong Buy) that is in the business of mining gold with a beta near 0.5.

With inflationary pressures around the world combining with a flight to safety, the yellow metal has hit historic highs. Estimates have been soaring as a result. The full-year Zacks Consensus Estimate for this year is up 63 cents, to $4.74 in the past 3 months. Next year's average projection is up 75 cents, to $6.42.

If Randgold can hit these marks the growth rates will be 320% and 35% respectively. And, unlike gold itself, you won't have to break the bank to buy some. Shares are going for about 22 times earnings and with a PEG of 0.4.

Consolidated Edison (NYSE: ED) has a beta of just 0.2 and is in one of the standard defensive industries, utilities.

ED is a diversified utility company providing electric, gas, and steam across the U.S. Shares have been roughly unchanged in the past month, but I think we can all agree that being flat is a huge accomplishment in that span.

Shares have a Zacks #2 Rank (Buy) thanks to steady estimates and a recent earnings surprise. Utilities are not sought after for growth, Edison's is at 4% per year, but do pay out nice dividends. ED pays out $2.40 per share per year, a 4.4% yield right now.

Less Beta, More Sleep

The stock market has a very polarizing affect on people. Either you get excited over the opportunities presented in volatile environments or you will do anything you can to steer clear of them. Well if the latter sounds more like you, trimming your portfolio's beta is a great way to put your mind at ease and help you catch more Z's.

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