We recently published a list of 10 Biggest Stocks with Negative Beta to Consider. In this article, we are going to take a look at where International Seaways (NYSE:INSW) stands against other biggest stocks with negative beta to consider.
Beta is a measureament 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.
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).
Sprawling oceangoing cargo vessels sailing on a glistening sea.
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.
Overall, INSW ranks 6th on our list of biggest stocks with negative beta to consider. While we acknowledge the potential of INSW as an investment, 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 INSW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
