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 are three low-volatility stocks that don’t make the cut and some better opportunities instead.
SouthState (SSB)
Rolling One-Year Beta: 0.40
With roots dating back to the Great Depression era of 1933, SouthState (NYSE:SSB) is a financial holding company that provides banking services, wealth management, and correspondent banking services across six southeastern states.
Why Does SSB Fall Short?
- Estimated net interest income growth of 3.4% for the next 12 months implies demand will slow from its five-year trend
- Efficiency ratio is expected to worsen by 2.6 percentage points over the next year
- Annual earnings per share growth of 6.5% underperformed its revenue over the last five years, showing its incremental sales were less profitable
At $103.42 per share, SouthState trades at 1.1x forward P/B. If you’re considering SSB for your portfolio, see our FREE research report to learn more.
Wells Fargo (WFC)
Rolling One-Year Beta: 0.63
Founded during the California Gold Rush in 1852 to provide banking and express delivery services to miners and merchants, Wells Fargo (NYSE:WFC) is a diversified financial services company that provides banking, lending, investment, and wealth management services to individuals and businesses.
Why Is WFC Risky?
- The company has faced growth challenges as its 6% annual net interest income increases over the last five years fell short of other banking companies
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 4.8%
- Net interest margin dropped by 33.6 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
Wells Fargo’s stock price of $86.31 implies a valuation ratio of 1.5x forward P/B. Dive into our free research report to see why there are better opportunities than WFC.
Seadrill (SDRL)
Rolling One-Year Beta: -0.05
Operating in water depths reaching 12,000 feet below the surface, Seadrill (NYSE:SDRL) owns and operates drillships and semi-submersible rigs that drill oil and gas wells in deepwater offshore locations.
Why Should You Sell SDRL?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 8.6% annually over the last ten years
- Costly operations and weak unit economics result in an inferior gross margin of 36.3% that must be offset through higher production volumes
- Cash-burning tendencies make us wonder if it can sustainably generate shareholder value
Seadrill is trading at $47.45 per share, or 25.8x forward P/E. To fully understand why you should be careful with SDRL, check out our full research report (it’s free).
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