JPMorgan Flags Low-Volatility Stocks as a Buying Opportunity
Key Takeaway: After a 6% decline this year against rising bond yields, low-volatility stocks in the U.S. and Europe are presenting an attractive entry point, according to JPMorgan's Mislav Matejka.
The Opportunity
Mislav Matejka, JPMorgan’s head of global and European equity strategy, has identified low-volatility stocks in the United States and Europe as a potential buying opportunity. He cites their recent underperformance and attractive entry points.
These stocks—found in sectors such as consumer staples, healthcare, utilities, insurance, and industrials—have moved inversely to rising bond yields since the start of the year. They have declined 6% while yields rose 55 basis points.
The Rally Scenario
Matejka noted two potential outcomes for investors:
- If bond yields stabilize: Low-volatility stocks could rally, mirroring their performance earlier this year when yields fell.
- If yields spike to 5%: These stocks might break their inverse correlation with yields and outperform.
JPMorgan expects lower yields in the medium term, which would favor this strategy.
Top Picks in the Low-Volatility Index
JPMorgan’s low-volatility index includes several overweight-rated stocks:
Coca-Cola
- Dividend Yield: 2.6%
- Recent Performance: Reported first-quarter earnings above estimates.
- Guidance: Raised full-year guidance to 8-9% comparable EPS growth.
- Management Confidence: Expressed confidence in managing cost uncertainties related to the Iran conflict.
Rollins
- Dividend Yield: 1.37%
- Rating: Overweight
- Upside Potential: Nearly 22% upside to the average price target.
- Analyst View: Praised the pest control company's go-to-market strategy and execution.
Procter & Gamble
- Dividend Yield: 3.01%
- Recent Performance: Reported quarterly earnings and revenue above expectations.
- Guidance: Delayed fiscal 2027 guidance due to Iran war uncertainty.
- Consumer Insight: CFO Andre Schulten noted U.S. consumer stability and the continuing bifurcation of consumer segments.