Time to bet on low beta? Nearly 30 stocks with Beta less than 1 more than doubled in 2020

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The year 2020 was full of surprises and low beta stocks creating big wealth for investors was also one of those developments that investors didn’t see it coming.

History suggests that high beta stocks outperform in a bulls market, but data suggests that the top wealth creators are low beta stocks if we compare the YTD or year-to-date performance.

Beta refers to a measure of stock volatility in relation to Sensex or the market. If the stock beta is less than 1 it is considered to be less volatile while a beta greater than 1 suggests that the stock is more volatile when compared with an index/market.

High beta stocks are considered to be riskier but usually have high return potential, while low beta stocks pose less risk.

There are as many as 29 stocks with a beta of less than 1 that have rallied 100-800% so far in the year 2020 that include names like Affle India, Navin Fluorine, Suzlon, IOL Chemicals, Adani Green, and Tanla Platforms etc. among others.

Many of the stocks mentioned in the list benefited from either Make in India or Countries seeking an alternative to China, suggest experts.

“It is very unusual for a low beta stock to double in a year but that was how 2020 was. In normal circumstances, high beta stocks will outperform in bull markets and underperform in bear markets,” Atish Matlawala, Sr Analyst, SSJ Finance & Securities told Moneycontrol.

“Our advice to the investor will be to invest in quality stocks with an investment horizon of 3-5 years,” he said.