Beta is a measurement of market risk or volatility that indicates how much the price of a stock tends to fluctuate up and down compared to other stocks. It is a statistical measure that helps investors understand the risk associated with a particular stock. Beta is calculated using regression analysis, a set of statistical methods used for the estimation of relationships between one or more independent variables, and is represented by the Greek letter ‘ß’. Beta gives a sense of the stock’s risk compared to that of the greater market.
A beta of 1 indicates that the security’s price tends to move with the market. A beta greater than 1 indicates that the security’s price is more volatile than the market. A beta of less than 1 means it tends to be less volatile than the market. For example, if a company has a beta of 2, it means that it is two times as volatile as the overall market.
Benefits of Investing in Negative Beta Stocks
A negative beta is a rare occurrence, but it indicates an inverse relationship between the stock’s price and the market. In other words, when the market declines, the stock’s price tends to rise, and when the market rises, the stock’s price tends to fall. A negative beta is highly unlikely, but it can occur in certain situations. For example, some investors argue that gold and gold stocks should have negative betas because they tend to do better when the stock market declines. This is because gold is often seen as a safe-haven asset, and investors tend to flock to it during times of market uncertainty.
In more detail, a negative beta means that the stock’s price is negatively correlated with the market. This means that when the market rises, the stock’s price tends to fall, and when the market falls, the stock’s price tends to rise. This can be beneficial for investors who are looking to diversify their portfolios and reduce their overall risk. However, it’s worth noting that a negative beta is not always a guarantee of success, and investors should still do their due diligence before investing in any stock.
While negative betas are rare, there are some examples of stocks that have exhibited negative beta characteristics. For example, during the 2008 financial crisis, the price of gold rose significantly while the stock market declined. This is an example of a negative beta, where the price of gold moved in the opposite direction of the market. Similarly, some defensive stocks like consumer staples and healthcare stocks tend to have negative betas because they are less affected by market fluctuations.
Tom Lee Expects Market Rally to Continue After Election
Tom Lee, Managing Partner and Head of Research at Fundstrat Global Advisors shared his market insights in an interview on CNBC on October 12, as the S&P 500 reached a new high, breaking above 5,800 for the first time ever. Despite the current bull run, which marks its two-year anniversary, Lee expressed caution about the market as the month progresses.
Lee advised his clients to “buy the dips” but thinks investors are waiting for the outcome of the presidential election before making major moves. He believes that once the election is over, the market will rally, with a target of around 6,000 for the S&P 500.
According to Lee, there are several factors supporting a potential market rally. Firstly, the Federal Reserve is taking a dovish stance, which is expected to continue supporting the market. Secondly, the economy looks healthy, and Lee does not think a recession is on the horizon.
Lee also pointed out that investors who have been cautious for the past two years are starting to realize that the $6 trillion in cash on the sidelines and the low levels of margin debt need to be put to work at a time when the Fed is supporting the market.
However, Lee acknowledged potential headwinds that could impact the market. One of the concerns is valuation, with the S&P 500 trading at a price-to-earnings (P/E) ratio of around 21.5, which is above its historical average. Some investors may view this as a sign that the market is overvalued.
Another concern is the rise in yields, which could make bonds more attractive to investors and potentially draw money away from the stock market. Although Lee noted that yields are up for the right reasons, as the economy is growing, he acknowledged that they are still higher than expected after the Fed’s 50-basis-point rate cut.
Finally, Lee addressed the possibility of slower and smaller rate cuts from the Fed, which could impact the market. However, he believes that the Fed’s goal is to normalize interest rates back towards neutral, as inflation pressures are ebbing. Lee thinks that this is a positive development, as it suggests that the Fed is confident in the economy’s resilience.
Beta is a useful measure of a stock’s volatility and risk. A negative beta indicates an inverse relationship between the stock’s price and the market, which can be beneficial for investors looking to diversify their portfolios. With this in context let’s look at the 10 biggest stocks with negative beta to consider.
An asset manager studying data on a stock market monitor to make informed investment decisions.
Our Methodology
To compile our list of the 10 biggest stocks with negative beta to consider, we used the Finviz and Yahoo stock screeners to find the largest companies with a beta of less than zero. We then narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Biggest Stocks with Negative Beta to Consider
10. Soleno Therapeutics (NASDAQ:SLNO)
Number of Hedge Fund Investors: 29
Beta: -1.44
Market Cap as of October 13: $2.13 Billion
Soleno Therapeutics (NASDAQ:SLNO) is a biotech company that focuses on rare diseases, particularly Prader-Willi Syndrome (PWS) hyperphagia. PWS is a genetic condition that creates insatiable hunger in patients, severely affecting their quality of life. There are no approved treatments for this condition, but Soleno Therapeutics’ (NASDAQ:SLNO) leading drug candidate, DCCR (diazoxide choline), has effectively reduced hunger in PWS patients.
DCCR has a unique mechanism of action that targets PWS hyperphagia while preserving lean mass. This potentially extends its use beyond PWS to weight loss, enhancing the company’s market prospects. The FDA has consistently shown a favorable attitude towards DCCR, and its date for submission is set for December 27.
If DCCR receives regulatory approval, it will allow Soleno Therapeutics (NASDAQ:SLNO) to tap into a potentially large market cap with little competition. DCCR would target the flagship hyperphagia symptom of PWS, which has no currently approved treatments. Soleno Therapeutics (NASDAQ:SLNO) estimates DCCR’s total addressable market could be over $2.0 billion, with roughly 10,000 patients identified in the US alone that could benefit from its therapy. The recent news regarding the FDA not requiring an advisory committee meeting is exceedingly bullish, suggesting that regulators are confident about Soleno Therapeutics’ (NASDAQ:SLNO) DCCR data.
Soleno Therapeutics’ (NASDAQ:SLNO), DCCR, appears to be an effective and well-tolerated treatment for PWS patients. DCCR is on the cusp of becoming the first approved treatment for this condition, which bodes well for its market adoption prospects. Industry analysts are bullish on the company’s stock price and have a consensus Buy rating at a target price of $72.13, which implies a 27.39% increase from its current level.
9. Madrigal Pharmaceuticals (NASDAQ:MDGL)
Number of Hedge Fund Investors: 30
Beta: -0.44
Market Cap as of October 13: $4.65 Billion
Madrigal Pharmaceuticals (NASDAQ:MDGL) is a clinical-stage biopharmaceutical company specializing in developing therapies for cardiovascular and liver diseases. The company’s primary focus is on non-alcoholic steatohepatitis (NASH), a condition with significant unmet medical needs.
In March, the FDA granted accelerated approval to Madrigal Pharmaceuticals’ (NASDAQ:MDGL) NASH therapy, Rezdiffra, making it the first and only approved therapy for NASH, a condition that affects millions of people worldwide. This approval marks a significant milestone for the company. According to management, the commercial launch of Rezdiffra has been successful, driven by high patient demand for the drug.
In Q2, Madrigal Pharmaceuticals (NASDAQ:MDGL) exceeded expectations and reported revenue of $14.6 million, all from sales of Rezdiffra. The company’s selling, general, and administrative (SG&A) costs, surged to $105.4 million, due to launch activities of the therapy. As of June 30, more than 50% of people covered by health insurance in the United States have coverage for Rezdiffra. This widespread coverage ensures that many patients have access to this life-changing treatment. Additionally, less than 5% of Rezdiffra-covered lives require a biopsy, making it an attractive option for patients who want to avoid invasive procedures.
Madrigal Pharmaceuticals (NASDAQ:MDGL) has also submitted a regulatory filing in the European Union, seeking approval for Rezdiffra. A final decision is expected in mid-2025, which could expand the drug’s market reach and increase its potential sales.
The company is conducting several ongoing studies to confirm the safety and efficacy of Rezdiffra. The pivotal phase III MAESTRO-NASH study, which provided the data for the drug’s accelerated approval, is ongoing as an outcomes study. In addition to the MAESTRO-NASH study, Madrigal Pharmaceuticals (NASDAQ:MDGL) is conducting two more phase III studies to further evaluate the safety and efficacy of Rezdiffra.
Madrigal Pharmaceuticals’ (NASDAQ:MDGL) commitment to establish Rezdiffra as the standard-of-care treatment for NASH could lead to its increased market potential and boost sales as a leading treatment option for NASH. With a consensus Buy rating from industry analysts, the stock has a target price of $362.53, which represents a 51.46% upside potential from its current level.
8. Wave Life Sciences (NASDAQ:WVE)
Number of Hedge Fund Investors: 30
Beta: -1.12
Market Cap as of October 13: $1.31 Billion
Wave is a biotechnology company that uses novel oligonucleotide chemistry to develop precision medicines. The company focuses on genetic diseases, with therapies designed to correct or silence faulty genes.
Wave Life Sciences (NASDAQ:WVE) is developing a treatment for Duchenne Muscular Dystrophy (DMD), a devastating muscle-wasting disease that affects 1 in every 5,000 newborns globally. The company’s candidate, WVE-N531, a treatment specifically designed for patients with a mutation in exon 53 of the dystrophin gene. It is a type of gene therapy that aims to restore the production of dystrophin protein in the muscles, which can help slow down or stop the progression of DMD. WVE-N531 has shown strong results in patients.
On September 24, Wave Life Sciences (NASDAQ:WVE) announced positive interim data for WVE-N531. The data showed >5% dystrophin production in patients, which is the same bar that enabled competitors to secure approval, with 9 out of 10 patients achieving this level. The data also showed improvement in several muscle health biomarkers. The safety data was also strong, with only mild treatment-emergent adverse events (TEAEs) reported.
As of 1H, Wave Life Sciences (NASDAQ:WVE) has a cash position of $153 million and a net loss of $64.4 million. The company will likely need to raise additional funding to complete a regulatory study. Analysts have a consensus Buy rating on Wave Life Sciences’ (NASDAQ:WVE) stock, with a target price of $16.00, indicating a potential gain of 60% from its current price.
7. Akero Therapeutics (NASDAQ:AKRO)
Number of Hedge Fund Investors: 31
Beta: -0.25
Market Cap as of October 13: $2.06 Billion
Akero Therapeutics (NASDAQ:AKRO) is a biotechnology company that is developing a treatment for Metabolic dysfunction-Associated Steatohepatitis (MASH), a condition characterized by the accumulation of fat in the liver. The company’s lead candidate, Efruxifermin (EFX), is an FGF21 analog that has shown strong results in pre-cirrhotic MASH.
MASH is a condition that affects an estimated 250 million people worldwide and is characterized by the accumulation of fat in the liver, inflammation, and fibrosis. The market potential for MASH treatments is estimated to be over $25 billion by 2032.
The MASH market is highly competitive, with many pipeline drugs and one approved drug, resmetirom. Resmetirom, is an oral, liver-directed, thyroid hormone receptor that has been approved for the treatment of NASH with liver fibrosis.
Akero Therapeutics’ (NASDAQ:AKRO) EFX has shown strong results in pre-cirrhotic MASH, with a 63-72% relative reduction in liver fat and a 24-32 U/L reduction in the liver enzyme ALT. However, in the SYMMETRY trial, only 22% to 24% of patients in the drug arm showed at least one stage improvement in fibrosis with no worsening of NASH at week 36.
Akero Therapeutics’ (NASDAQ:AKRO) has a cash balance of $848 million. Research and development expenses for the three-month period ended June 30, were $55.3 million, while general and administrative expenses were $10.4 million. At that rate, the company has a cash runway well into 2027, or beyond its expected date of data drop from the ongoing phase 3 trial.
Akero Therapeutics’ (NASDAQ:AKRO) is a good candidate for a basket of MASH players. The company’s EFX has differentiated itself well in pre-cirrhotic MASH, and the 96-week data may change the outcome in cirrhotic MASH. With a consensus Buy rating from industry analysts, Akero Therapeutics’ (NASDAQ:AKRO) stock has a target price of $45.78, which represents a 42.83% upside potential from its current level.
6. International Seaways (NYSE:INSW)
Number of Hedge Fund Investors: 34
Beta: -0.08
Market Cap as of October 13: $2.55 Billion
International Seaways (NYSE:INSW) is one of the largest tanker companies providing energy transportation services globally and operates a fleet of crude and product tankers. The company’s fleet has an average age of 12.1 years, and it operates under a combination of pool agreements, time charters, and voyage charters.
International Seaways’ (NYSE:INSW) fleet is well-positioned to capitalize on growth in the tanker market, with a large and diverse fleet that includes a mix of crude and product tankers. Additionally, the company has a strong balance sheet, with low debt and a solid cash position, which provides it with the financial flexibility to invest in its business and return capital to shareholders.
In Q2, International Seaways (NYSE:INSW) generated $144.7 million in net income. The company’s operating cash flow and operating income sufficiently cover its interest expenses, and its breakeven cash flow of $16,100 provides a cushion in case of weaker day rates. International Seaways’ (NYSE:INSW) debt maturity profile is also well-distributed, with a significant portion of its debt maturing beyond 2028. The company’s share buyback program is another positive factor, with International Seaways (NYSE:INSW) having repurchased $25 million worth of shares in the second quarter.
International Seaways’ (NYSE:INSW) breakeven cash flow and solid balance sheet provide it with a cushion in case of weaker day rates. Additionally, the company’s fleet is well-positioned to capitalize on growth in the tanker market, and its diverse revenue streams reduce its exposure to any one particular market segment. The company’s valuation is also attractive, with a forward PE ratio of 5.27, which represents a 56.93% discount to the sector median of 12.24. Industry analysts have reached a consensus on the stock’s Buy rating, with an average target price of $69.50 that suggests an almost 29% upside potential from its current levels.
5. Day One Biopharmaceuticals (NASDAQ:DAWN)
Number of Hedge Fund Investors: 34
Beta: -1.51
Market Cap as of October 13: $1.36 Billion
Day One Biopharmaceuticals (NASDAQ:DAWN) is a biopharmaceutical company focused on developing targeted therapies for patients with genomically defined cancers.
Day One Biopharmaceuticals (NASDAQ:DAWN) has been making waves in the oncology space with its lead drug candidate, Tovorafenib, now branded as Ojemda. Ojemda is a treatment for pediatric low-grade glioma (pLGG), a type of brain or spinal cord tumor that affects children.
In April, Ojemda was approved by the FDA for the treatment of pLGG. The FDA’s approval of Ojemda marked a major milestone in the treatment of pLGG, a condition that has long been in need of effective and targeted therapies. Ojemda has shown significant promise in clinical trials, demonstrating its ability to effectively manage the symptoms of pLGG and improve the quality of life for affected children.
In July, Bank of America (BofA) gave Day One Biopharmaceuticals (NASDAQ:DAWN) a double upgrade, citing the immense potential of Ojemda. This upgrade came on the heels of the FDA’s approval of Ojemda. The upgrade is a testament to the significant progress that the company has made in developing Ojemda and not only validates the company’s research and development efforts but also opens up a new revenue stream for the company.
Day One Biopharmaceuticals (NASDAQ:DAWN) presents an attractive investment opportunity for those looking to capitalize on the company’s potential for growth and success.
4. Zoom Video Communications (NASDAQ:ZM)
Number of Hedge Fund Investors: 39
Beta: -0.05
Market Cap as of October 13: $21.75 Billion
Zoom Video Communications (NASDAQ:ZM) became a household name during the COVID-19 pandemic, providing cloud-based video conferencing and collaboration services. The company continues to expand into new areas, including AI-powered solutions, and its growth has moderated compared to the pandemic peak.
In Q2, Zoom Video Communications (NASDAQ:ZM) reported a 2.1% annualized gain in revenue, beating consensus estimates, and a 15% beat on adjusted EPS. Net income rose to $219 million, indicating a 20.3% growth rate. Enterprise revenues were stronger, the company’s customer count in contact center markets grew over 100% year over year, and the portion of customers generating at least $100,000 in sales rose above 3,900. The company’s retention rates are at historic lows, with figures at 2.9% which shows that fewer customers are leaving the platform for larger name alternatives. The company’s cash position is strong, with $7.5 billion on its balance sheet, which could inspire share buybacks in the future.
In October, Zoom Video Communications (NASDAQ:ZM) held its annual Zoomtopia conference, the event highlighted the company’s focus on artificial intelligence (AI) and contact center solutions. Will Power Senior Research Analyst covering Cloud Services, at the investment firm Baird noted that 57% of the Fortune 500 has already enabled Zoom AI Companion. Additionally, Power mentioned that AI Companion 2.0 is adding more capabilities, which is expected to drive growth for the company.
Power remains positive on Zoom’s expanding platform, citing growth opportunities in phone, contact center, and AI. The analyst continues to recommend Zoom Video (NASDAQ:ZM) as a value idea, maintaining an Overweight rating on the stock. This endorsement is a testament to the company’s strong growth trends and its potential for continued success in the software industry. Zoom Video’s (NASDAQ:ZM) forward P/E ratio is 13.21, which represents a significant 45.70% discount compared to the sector median of 24.33.
3. KE Holdings (NYSE:BEKE)
Number of Hedge Fund Investors: 43
Beta: -0.72
Market Cap as of October 13: $26.31 Billion
KE Holdings (NYSE:BEKE) operates an integrated platform that combines online and offline services for housing transactions. The company runs Beike, its flagship platform for housing services, and Lianjia, a well-known real estate brokerage brand. Additionally, the company owns the Deyou brand, which connects brokerage stores, with other brands.
KE Holdings (NYSE:BEKE) manages 8,000 offices across China and oversees more than 500,000 rental apartments. Despite a significant downturn in the real estate market, the company has expanded its market share in both new and existing home sectors. This achievement is largely attributed to its Agent Cooperation Network (ACN), which standardizes transactions and fosters agent collaboration, along with the trusted Lianjia brand, recognized for its reliable property listings.
In Q2, KE Holdings (NYSE:BEKE) reported adjusted earnings per share of $2.28, which significantly exceeded the market’s average estimate of $1.60. Revenue grew by 19.9% year-over-year, reaching $3.2 billion, surpassing the market’s forecast of $3.12 billion.
KE Holdings (NYSE:BEKE)’s strong performance was driven by growth in its existing home transaction services, as well as its home renovation and rental divisions. Revenue from existing home transactions increased by 14.3% year-over-year to $1.0 billion, while revenue from home renovation and furnishing services surged by 53.9% to $0.6 billion.
Trading at a price-to-earnings ratio of 22.28 the company is significantly undervalued with a discount of 40.61% compared to the sector median of 37.52. KE Holdings (NYSE:BEKE) is considered one of the top Chinese stocks to invest in for exposure to China’s real estate market.
2. Structure Therapeutics (NASDAQ:GPCR)
Number of Hedge Fund Investors: 43
Beta: -3.52
Market Cap as of October 13: $2.19 Billion
Structure Therapeutics (NASDAQ:GPCR) is a biotechnology company developing oral therapies targeting G-protein-coupled receptors (GPCRs) for various diseases. GPCRs are a group of proteins in the cell membrane that receive signals and convert them into physiological effects.
Structure Therapeutics (NASDAQ:GPCR) is also developing innovative treatments for various diseases, including obesity and type 2 diabetes. The company’s lead candidate, GSBR-1290, is an oral GLP-1 agonist that has shown promising weight loss results and a strong safety profile in early clinical trials.
Glucagon-like peptide-1 (GLP-1) agonist drugs have taken the pharmaceutical world by storm due to their ability to suppress appetite and help patients lose weight with minimal side effects. The market for GLP-1 agonists is expected to be worth over $100 billion by 2030, making it one of the most lucrative markets in the pharmaceutical industry. The company’s GSBR-1290 is an oral small-molecule product that targets the GLP-1 receptor. The drug has shown statistically significant weight loss results in early clinical trials and has a strong safety profile, with no serious adverse events reported. Structure Therapeutics (NASDAQ:GPCR) plans to initiate a Phase 2b obesity study in the fourth quarter of this year.
The GLP-1 agonist market is highly competitive, with several pharmaceutical companies, developing their own candidates. However, Structure Therapeutics’ oral GLP-1 candidate has a unique advantage over injectable therapies, making it a potentially strong player in the market.
Structure Therapeutics’ (NASDAQ:GPCR) progress and diverse pipeline of candidates make it a potentially strong investment opportunity. Industry analysts are extremely bullish on the company’s stock price and have a consensus Buy rating at a target price of $87.90, which implies a 78.56% increase from its current level.
1. Biogen (NASDAQ:BIIB)
Number of Hedge Fund Investors: 46
Beta: -0.07
Market Cap as of October 13: $27.44 Billion
Biogen (NASDAQ:BIIB) is a pharmaceutical company focused primarily on central nervous system diseases. The company has a rich history of innovation and has been a pioneer in the development of treatments for Alzheimer’s disease and multiple sclerosis (MS), a chronic and often disabling disease that affects the central nervous system.
Biogen’s (NASDAQ:BIIB) focus on Alzheimer’s disease and other growth areas is expected to drive future growth. The company’s second approved drug to treat Alzheimer’s, Leqembi, has received full FDA approval and is generating positive long-term clinical data. With a potential peak revenue opportunity of over $3.5 billion by early next decade, Leqembi is expected to be a major driver of growth for the company.
In addition to Leqembi, Biogen (NASDAQ:BIIB) has a number of other promising pipeline candidates, including BIIB080, a tau-targeting Alzheimer’s therapy in Phase 2 studies, BIIB122, a Parkinson’s disease candidate, and Felzartamab, a kidney disease therapy that has shown “unprecedented” results in Phase 2 studies.
Biogen’s (NASDAQ:BIIB) financials are also strong, with the company boasting $1.9 billion in cash and $4.4 billion of net debt, which is relatively low for a pharmaceutical company of its size. The company generated $592 million of free cash flow in Q2, driven by its high-profit margins, which were an impressive 39% in Q2. With a consensus Buy rating from industry analysts, Biogen’s (NASDAQ:BIIB) stock has a target price of $264.89, which represents a 33.75% upside potential from its current level.
While we acknowledge the potential of Biogen (NASDAQ:BIIB) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BIIB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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