3 Low-Volatility Stocks That Fall Short
Stability is great, but low-volatility stocks may struggle to deliver market-beating returns over time as they sometimes underperform during bull markets.
Finding the right balance between safety and returns isn’t easy, which is why StockStory is here to help. That said, here are three low-volatility stocks to steer clear of and a few better alternatives.
Macy's (M)
Rolling One-Year Beta: 0.86
With a storied history that began with its 1858 founding, Macy’s (NYSE:M) is a department store chain that sells clothing, cosmetics, accessories, and home goods.
Why Is M Risky?
- Ongoing store closures and lackluster same-store sales indicate sluggish demand and a focus on consolidation
- Weak same-store sales trends over the past two years suggest there may be few opportunities in its core markets to open new locations
- Earnings per share have contracted by 10.7% annually over the last three years, a headwind for returns as stock prices often echo long-term EPS performance
Macy's is trading at $22.88 per share, or 10.4x forward P/E. To fully understand why you should be careful with M, check out our full research report (it’s free).
Columbia Sportswear (COLM)
Rolling One-Year Beta: 0.75
Originally founded as a hat store in 1938, Columbia Sportswear (NASDAQ:COLM) is a manufacturer of outerwear, sportswear, and footwear designed for outdoor enthusiasts.
Why Are We Bearish on COLM?
- Muted 3.9% annual revenue growth over the last five years shows its demand lagged behind its consumer discretionary peers
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 8.5% for the last two years
- Waning returns on capital from an already weak starting point displays the inefficacy of management’s past and current investment decisions
At $58.47 per share, Columbia Sportswear trades at 14.7x forward P/E. Check out our free in-depth research report to learn more about why COLM doesn’t pass our bar.
Origin Bancorp (OBK)
Rolling One-Year Beta: 0.36
Founded in 1912 during the early boom days of Louisiana banking, Origin Bancorp (NYSE:OBK) is a financial holding company that provides personalized banking services to businesses, municipalities, and individuals across Texas, Louisiana, and Mississippi.
Why Are We Wary of OBK?
- Annual revenue growth of 8.7% over the last five years was below our standards for the banking sector
- Annual earnings per share growth of 1.5% underperformed its revenue over the last five years, showing its incremental sales were less profitable
- Estimated tangible book value per share growth of 8.7% for the next 12 months implies profitability will slow from its two-year trend
Origin Bancorp’s stock price of $53.22 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including OBK in your portfolio.
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