Stocks stumbled out of the gate in September. Use these hedges to guard against volatility, Evercore ISI says
Stocks are off to a shaky start in September but Evercore ISI says investors can use one group that has historically moved opposite to the broader market to help cushion against volatility. Traders have lately fretted about the effect of rising oil prices on inflation. On Wednesday, though, the S & P 500 , Nasdaq Composite and Dow Jones Industrials Average snapped a three-day decline caused, partly at least, by elevated bond yields . “Buying Negative Beta stocks helps a long term oriented portfolio ‘ride out’ volatility events,” Evercore ISI strategists led by Julian Emanuel wrote Monday, pointing to risks ranging from interest rates, geopolitics and the midterm election as potential catalysts for heightened volatility in September. Evercore ISI ran a screen to find “negative beta” stocks, or those in the S & P 500 whose daily moves over the past six months have tended to run opposite the broader index. The September list numbered 115 stocks, down from 121 in August and, of those, the firm whittled down the top 20. Evercore’s 20 stocks with the most negative betas Financials, utilities, consumer staples and energy accounted for almost 70% of the stocks that floated to the top. Evercore ISI ties energy stocks to the rise and fall of oil prices, calling the sector a “synthetic S & P 500 put option” because of geopolitical pressure on the broader market. Occidental Petroleum stands out on the screen. The oil and gas producer has a six-month beta of negative 1.23, the fourth-most negative among the 20 stocks that Evercore highlighted. Analyst Stephen Richardson rates Occidental outperform. Houston-based Occidental recently posted strong second-quarter results , reporting $3 billion of free cash flow before working capital from continuing operations, the most since the third quarter of 2022. The company reduced its debt by $1.9 billion to $11.8 billion in the quarter. Chevron had a beta of -0.90 and sports an outperform rating from Richardson. The oil major said Wednesday it plans to more than double its production in Venezuela over the next five years through a $7 billion investment, lifting daily production to 600,000 barrels a day by 2031, from the current 280,000 bpd. Defensive consumer staples stocks mentioned by Evercore ISI included supermarket chain Kroger and tobacco maker Altria .
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