In This Article:
Low-volatility stocks may offer stability, but that often comes at the cost of slower growth and the upside potential of more dynamic companies.
Choosing the wrong investments can cause you to fall behind, which is why we started StockStory - to separate the winners from the losers. That said, here is one low-volatility stock that could succeed under all market conditions and two that may not deliver the returns you need.
Two Stocks to Sell:
Hormel Foods (HRL)
Rolling One-Year Beta: 0.22
Best known for its SPAM brand, Hormel (NYSE:HRL) is a packaged foods company with products that span meat, poultry, shelf-stable foods, and spreads.
Why Does HRL Worry Us?
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Falling unit sales over the past two years show it’s struggled to move its products and had to rely on price increases
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Gross margin of 16.7% is an output of its commoditized products
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Performance over the past three years shows each sale was less profitable, as its earnings per share fell by 4.9% annually
At $29.40 per share, Hormel Foods trades at 17.2x forward P/E. If you’re considering HRL for your portfolio, see our FREE research report to learn more.
A. O. Smith (AOS)
Rolling One-Year Beta: 0.70
Credited with the invention of the glass-lined water heater, A.O. Smith (NYSE:AOS) manufactures water heating and treatment products for various industries.
Why Does AOS Fall Short?
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Absence of organic revenue growth over the past two years suggests it may have to lean into acquisitions to drive its expansion
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Anticipated sales growth of 2.4% for the next year implies demand will be shaky
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7.5 percentage point decline in its free cash flow margin over the last five years reflects the company’s increased investments to defend its market position
A. O. Smith’s stock price of $67.11 implies a valuation ratio of 17.5x forward P/E. Check out our free in-depth research report to learn more about why AOS doesn’t pass our bar.
One Stock to Watch:
Zoetis (ZTS)
Rolling One-Year Beta: 0.30
Originally spun off from Pfizer in 2013 as the world's largest pure-play animal health company, Zoetis (NYSE:ZTS) discovers, develops, and sells medicines, vaccines, diagnostic products, and services for pets and livestock animals worldwide.
Why Is ZTS Interesting?
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Average constant currency growth of 9% over the past two years demonstrates its ability to grow internationally despite currency fluctuations
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Impressive free cash flow profitability enables the company to fund new investments or reward investors with share buybacks/dividends
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Stellar returns on capital showcase management’s ability to surface highly profitable business ventures