The Wall Street Journal-20080214-SmartMoney Stock Screen - Low Volatility

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SmartMoney Stock Screen / Low Volatility

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Corn isn't such a great fuel. By the time you've fertilized, harvested, transported and processed it into a gallon of ethanol, you've used three-quarters of a gallon of oil. Better to buy sugar from Brazil. There it is turned into that same gallon of ethanol with just a pint of crude oil.

Perhaps after this year's presidential election, politicians will realize that providing big payments to corn fuel makers isn't a good idea. Corn inflation has increased the price of many items on an average grocery bill, either because they're made using corn or because they're made from a grain farmers have swapped out of in favor of it.

If you believe grain prices will ease on either a policy change or a broad economic slowdown, you might have a look down the cereal aisle for stock bargains. General Mills and its peers have been busy raising prices to make up for higher ingredient costs. (For cereal, General Mills shrank boxes rather than increase prices, but the effect is the same.) The price increases have "stuck," as analysts say, meaning customers haven't bought significantly less. If ingredient prices fall, presumably part or all of the higher product prices will remain stuck, resulting in a boost to profit margins.

Not that General Mills is struggling with margins now. It turns well more of each sales dollar into operating profit than the average packaged food company. Higher prices have helped, but so have efficiency efforts and attention to product assortment.

General Mills turned up recently on a search for stocks with limited trading volatility and modest share prices. It goes for 16.6 times trailing earnings, on par with the S&P 500-stock index. For the fiscal year ending May 27, the company's profit is expected to increase 8.5%. The stock has been only a quarter as volatile as the broad market over the past three years.

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Seeking a Safe Harbor

These eight stocks have promising growth prospects and a history of low

trading volatility, or beta.

Projected

Trailing EPS Growth

Company Industry Price Beta P/E (This Year)

Anheuser-Busch (BUD)

Brewers $47.32 0.7 17 9%

Clorox (CLX)

Cleaning Products 57.07 0.2 17 2

General Mills (GIS)

Processed/Packaged Goods 54.91 0.3 17 8

Genuine Parts (GPC)

Auto Parts 45.03 0.7 15 8

GlaxoSmithKline (GSK)

Drug Manufacturers 42.90 0.5 11 123

Hormel Foods (HRL)

Meat Products 38.84 0.3 18 10

Johnson & Johnson (JNJ)

Drug Manufacturers 61.88 0.2 17 7

Mattel (MAT)

Toys & Games 20.68 0.6 13 14

Data as of Feb. 11, 2008

Source: Hemscott