Money
& Investing 
How to Get More "Punch" for Your Dollar?
Consider "Beta" -- a Look at Rino and Chindex
Have you ever gotten into a situation where you have had a choice between several stocks to buy just when you saw a stock market rally starting to heat up?
In a situation like that, you need to study things such as a stock's earnings outlook, technical setup and the strength of the industry group. There is, however, another technical tool that you should check, too.
It's called "beta".
Beta is a measure of a stock's volatility in relation to the stock market.
This technical tool is listed as a field in eSignal's Quote pages. In simple terms, the beta of the stock market is given as 1.00. Generally, the Standard & Poor's 500 Index is used as a proxy for the market.
A stock that is more volatile than the stock market will have a higher beta. One that is less volatile will have a beta below 1.00. A stock that moves contrary to the market could have a negative beta. Generally, a stock's beta will range anywhere from 0.10 to 8.00.
Simply trying to buy a stock with a high beta when a market rally is unfolding is generally not the way to go. That is because beta is a measure of a stock's prior price volatility. What you need to put into the stock-picking process are the intangibles, such as earnings projections, relative strength, valuation, and so forth.
A good idea would be to look at your stock watch list of leading stocks and, then, take into consideration each stock's beta.
Another approach would be to look for stocks with a high beta and, then, check to see if they have good earnings projections and have been acting right. One can see below an abbreviated list of a few stocks with the highest beta and projected earnings growth more than 20 percent.
A leading issue in the NASDAQ market with a high beta is Rino International Corp. (RINO), a producer of wastewater treatment and antipollution equipment for the iron and steel industry in China. It has annual sales of 139 million dollars.
Rino has a beta of 3.60, which means the stock has been more than three times as volatile as the stock market. This year, Rino has soared from 3.50 to a peak of 28 – a 700 percent gain. The stock remains in an up trend. It had recently broken out from a base at 27.30.
Rino's earnings this year should surge 118 percent to 1.85 a share from 85 cents a year ago. Looking out to 2010, The Street looks for net to rise 23 percent to 2.27 a share. It has a price-earnings ratio of just 12, based on projected 2010 net.
Another high flyer among the top beta growth stocks is little known Aixtron Ag. (AIXG), a German-based maker of equipment for the semiconductor industry. This year, the stock has surged from 6 to a peak of 38. It is now in a six-week base.
This year, Aixtron earnings should jump 77 percent to 56 cents a share from 32 cents a year ago. Going out to 2010, analysts project an 80 percent gain in net to 1.01 a share. The stock does sell with a high price-earnings ratio of 32 based on 2010 net.
A high-beta issue that has not run away too much to the up side is Chindex International Inc. (CHDX). The stock has a beta of 2.69. The stock is in a three-month base and is well set up to break out. Net for the provider of medical equipment in China should leap 103 percent this fiscal year (March 2010) to 63 cents a share from 31 cents a year ago.
Of course, high beta stocks can cut both ways. If the stock market should go into an unexpected decline, the high-risk, high-beta stock could decline much more than the general market.
High-beta stocks mean greater volatility and are, therefore, considered to be riskier. They can provide potentially higher returns, but, in some cases, higher losses. Low-beta stocks pose less risk but also lower returns.
A stock with a low beta of just 0.78 that is doing well now is DirecTV Group, Inc. (DTV). The stock has climbed from 22 to 31 this year. Net for 2010 is expected to soar 61 percent to 2.21 a share from an anticipated 1.37 this year.
It is interesting to note that several school stocks have low betas but strong earnings outlooks. They include Lincoln Educational Services Corp. (LINC) with a beta of 0.31 and Capella Education Co. (CPLA) with a beta of 0.18. This year, Lincoln's net should be up 117 percent in 2009 and Capella's 48 percent in 2009. Several school stocks tend to, at times, move contrary to the stock market.
Mr. Fasciocco is the publisher of Ticker Tape Digest at www.tickertapedigest.com. He is a contributing writer for several publications. Mr. Fasciocco can be reached at leo@tickertapedigest.com.
