You may want to wait until the stock market turns up again before expending energy on trying to pick individual companies.
That’s because, during bear markets, almost all stocks become correlated with the market. Only once a new bull market starts do correlations fall, and that’s when you have relatively good odds of picking stocks that will beat the market averages.
To illustrate how correlations vary with the market cycle, consider the bear-market bottom in March 2020, at the end of the waterfall decline that accompanied the initial stages of the Covid-19 pandemic. The S&P 500 Index SPX, +2.39% hit its low on March 23 of that year, and most individual stocks did as well. In fact, based on my analysis of FactSet data, the median stock in the S&P 1500 Index — consisting of large-, mid- and small-cap stocks — declined to its bear-market low within five days of March 23. That’s a narrow range.
A broader range existed at the bull-market top earlier this year. Though the S&P 500 rose to a record closing high Jan. 3, many individual stocks did the same long before or after. In fact, the median stock in the S&P 1500 topped out 55 days away from Jan. 3 — as early as Nov. 9, 2021 or as late as Feb. 27 of this year. This range is more than 10 times wider than at the March 2020 bottom.
We don’t know when a new bull market will begin, needless to say. As this is written, the S&P 500 is 18.1% below its early-January high, just shy of the 20% loss threshold that’s usually considered a bear market. The market could very well continue to decline, perhaps significantly, and so long as the trend is down, it’s a good bet that the stocks you pick will march to the beat of a similar drummer.
But it’s not too early to start building your buy list, in anticipation of when the major trend does turn back up. To assist you in that process, I constructed the following table of stocks that are uncorrelated with the overall stock market.
To do so, I started with a list of stocks that are currently recommended for purchase by at least two of the top-performing newsletters monitored by my performance-auditing firm. I then sorted them according to their betas — a statistical measurement of the degree to which a stock historically has moved up or down with the market as a whole.
The table below contains the dozen such stocks with the lowest betas; they are listed in ascending order of their betas.
| Stock | Beta | # newsletters currently recommending for purchase |
| ZimVie Inc. ZIMV, +2.03% | 0.11 | 2 |
| Clorox Co. CLX, +0.80% | 0.26 | 2 |
| General Mills Inc. GIS, +1.23% | 0.37 | 2 |
| Moderna Inc. MRNA, +5.95% | 0.41 | 2 |
| Verizon Communications Inc. VZ, +0.25% | 0.46 | 2 |
| Procter & Gamble Co. PG, +1.07% | 0.59 | 2 |
| Merck & Co. Inc. MRK, -0.46% | 0.60 | 3 |
| Altria Group Inc. MO, +1.67% | 0.60 | 2 |
| Bristol Myers Squibb Co. BMY, -0.66% | 0.60 | 2 |
| Johnson & Johnson JNJ, -0.57% | 0.61 | 2 |
| Pfizer Inc. PFE, -0.93% | 0.62 | 3 |
| PetMed Express Inc. PETS, +0.05% | 0.63 | 2 |
Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at [email protected].
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