Tech stocks that had been driving the broader market rally for the past few years are unexpectedly weighing on Wall Street. Not only has the rally come to a halt, but tech stocks have been bleeding over the past few sessions.
Investors have raised concerns over the sky-high valuations of tech stocks and are shunning riskier assets amid the ongoing market volatility.
Given this situation, it would be ideal to bank on defensive stocks, such as those from the utilities sector, to counter the market volatility. These include American States Water Company AWR, Ameren Corporation AEE and Entergy Corporation ETR. Each of these stocks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
These stocks are from the low-beta category (beta greater than 0 but less than 1). Hence, the recommended approach is to invest in low-beta stocks with a high dividend yield and a favorable Zacks Rank.
Tech Stocks Bleed
The Dow, S&P 500 and Nasdaq declined 1.1%, 0.8% and 1.2% respectively, on Tuesday, extending their losses from the previous session. The decline is being led by some of the big tech giants, including NVIDIA Corporation NVDA, Amazon.com, Inc. AMZN and Microsoft Corporation MSFT.
Tech stocks have lately come under pressure, especially those with a focus on artificial intelligence (AI). AI stocks have primarily been responsible for the broader market rally in 2024 and this year. A large number of tech companies are making massive investments in AI as they continue to explore the space.
Also, several big tech names have announced major deals for the development of AI and increased their capex. However, investors, after being optimistic about the prospects of AI, have finally been raising concerns over their massive capex plans, a surge in debt financing and sky-high valuations.
These have been denting investors’ sentiment. Also, several other factors, such as high inflation partly because of the fresh tariffs imposed by President Donald Trump, and uncertainty over another rate cut in December, have been weighing on investor confidence.
3 Low-Beta Utility Stocks With Upside
American States Water Company
American States Water Company, along with its subsidiaries, provides fresh water, wastewater services and electricity to its customers in the United States. AWR principally works through its two major subsidiaries — Golden State Water Company and American States Utility Services.
American States Water Company has an expected earnings growth rate of 4.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the last 60 days. American States Water Company has a beta of 0.64 and a current dividend yield of 2.73%.
Ameren Corporation
Ameren Corporation is a utility company that generates and distributes electricity and natural gas to residential, commercial, industrial and wholesale end markets in Missouri and Illinois. AEE serves nearly 2.4 million electric and more than 900,000 natural gas customers.
Ameren Corporation’s expected earnings growth rate for the current year is 7.8%. The Zacks Consensus Estimate for current-year earnings improved 0.6% over the past 60 days. AEE currently carries a Zacks Rank #2. Ameren Corporation has a beta of 0.50 and a current dividend yield of 2.70%.
Entergy Corporation
Entergy Corporation is primarily engaged in electric power production and retail distribution of power. ETR has a 30,000-megawatt (MW) generating capacity, including more than 8,000 MW of nuclear fuel capacity.
Entergy Corporation has an expected earnings growth rate of 6.9% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the last 60 days. Entergy Corporation has a beta of 0.63 and a current dividend yield of 2.68%.
#1 Semiconductor Stock to Buy (Not NVDA)
The incredible demand for data is fueling the market's next digital gold rush. As data centers continue to be built and constantly upgraded, the companies that provide the hardware for these behemoths will become the NVIDIAs of tomorrow.
One under-the-radar chipmaker is uniquely positioned to take advantage of the next growth stage of this market. It specializes in semiconductor products that titans like NVIDIA don't build. It's just beginning to enter the spotlight, which is exactly where you want to be.
See This Stock Now for Free >>Amazon.com, Inc. (AMZN) : Free Stock Analysis Report
Ameren Corporation (AEE) : Free Stock Analysis Report
Microsoft Corporation (MSFT) : Free Stock Analysis Report
Entergy Corporation (ETR) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
American States Water Company (AWR) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
