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 Structure Therapeutics (NASDAQ:GPCR) 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).
A scientist in a lab coat observing a beaker with colored liquid as it bubbles and hisses.
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.
Overall, GPCR ranks 2nd on our list of biggest stocks with negative beta to consider. While we acknowledge the potential of GPCR 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 GPCR 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.