Risk Management: 9 Low Beta Stocks With Low Corporate Governance Risk

by: Kapitall

If you are looking to put your money to work in defensive securities, the following list might interest you.

To compile this list we looked for stocks with the following characteristics:

  • U.S. Stocks with market caps between $2B and $10B
  • Beta below 1
  • And with low Governance Risk Indicators according to RiskMetrics

RiskMetrics introduced the Governance Risk Indicator in 2010 and it evaluates the following governance areas:

  • - Audit
  • - Board Structure
  • - Shareholder Rights
  • - Compensation

All the companies in this list have low risk levels in each of these areas when comparing with the standard market practices.

We've also gone back in time, and had a look at the list's performance over the last month. An equally weighted index of the companies mentioned below have outperformed the S&P 500 (NYSEARCA:SPY) over the last month. (To access a complete analysis of this list's performance, click here).

(Click charts to expand)

Considering this information, which of these stocks do you think will better weather a market pullback and deliver attractive returns in the long run?

All of the stocks mentioned below have low corporate governance risk given their board composition and audit, compensation and shareholders' policies, according to the metrics developed by RiskMetrics Group.

1. Towers Watson & Co. (TW): Management Services Industry. Market cap of $4.17B. Beta 0.6. The stock has gained 17.43% over the last year.

2. The Sherwin-Williams Company (NYSE:SHW): Specialty Retail, Other Industry. Market cap of $8.92B. Beta 0.66. The stock has gained 6.06% over the last year.

3. Safeway Inc. (NYSE:SWY): Grocery Stores Industry. Market cap of $9.13B. Beta 0.7. The stock has lost 4.31% over the last year.

4. VeriSign Inc. (NASDAQ:VRSN): Application Software Industry. Market cap of $6.26B. Beta 0.75. The stock has gained 35.63% over the last year.

5. Quest Software Inc. (NASDAQ:QSFT): Business Software & Services Industry. Market cap of $2.31B. Beta 0.76. The stock has gained 33.8% over the last year.

6. Buckle Inc. (NYSE:BKE): Apparel Stores Industry. Market cap of $2.15B. Beta 0.86. The stock is a short squeeze candidate, with a short float at 21.3% (equivalent to 13.85 days of average volume). Exhibiting strong upside momentum--currently trading 8.14% above its SMA20, 16.16% above its SMA50, and 41.19% above its SMA200. The stock has had a good month, gaining 22.4%.

7. Transatlantic Holdings Inc. (NYSE:TRH): Property & Casualty Insurance Industry. Market cap of $2.98B. Beta 0.91. The stock has lost 7.76% over the last year.

8. Cintas Corporation (NASDAQ:CTAS): Business Services Industry. Market cap of $4.42B. Beta 0.93. The stock has gained 9.04% over the last year.

9. Aeropostale, Inc. (NYSE:ARO): Apparel Stores Industry. Market cap of $2.09B. Beta 0.95. Might be undervalued at current levels, with a PEG ratio at 0.87, and P/FCF ratio at 12.85. The stock has lost 19.47% over the last year.

*Corporate governance data sourced from Yahoo! Finance, other relevant data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.