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Stability is great, but low-volatility stocks may struggle to deliver market-beating returns over time as they sometimes underperform during bull markets.
Choosing the wrong investments can cause you to fall behind, which is why we started StockStory - to separate the winners from the losers. Keeping that in mind, here are three low-volatility stocks that don’t make the cut and some better opportunities instead.
Bright Horizons (BFAM)
Rolling One-Year Beta: 0.38
Founded in 1986, Bright Horizons (NYSE:BFAM) is a global provider of child care, early education, and workforce support solutions.
Why Do We Avoid BFAM?
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Organic sales performance over the past two years indicates the company may need to make strategic adjustments or rely on M&A to catalyze faster growth
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Incremental sales over the last five years were less profitable as its earnings per share were flat while its revenue grew
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Below-average returns on capital indicate management struggled to find compelling investment opportunities
Bright Horizons is trading at $122.32 per share, or 29.4x forward P/E. To fully understand why you should be careful with BFAM, check out our full research report (it’s free).
General Motors (GM)
Rolling One-Year Beta: 0.78
Founded in 1908 by William C. Durant, General Motors (NYSE:GM) offers a range of vehicles and automobiles through brands such as Chevrolet, Buick, GMC, and Cadillac.
Why Is GM Not Exciting?
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Disappointing unit sales over the past two years suggest it might have to lower prices to accelerate growth
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Estimated sales decline of 6.2% for the next 12 months implies a challenging demand environment
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Gross margin of 12.5% is below its competitors, leaving less money to invest in areas like marketing and R&D
General Motors’s stock price of $49.68 implies a valuation ratio of 4.6x forward P/E. If you’re considering GM for your portfolio, see our FREE research report to learn more.
Select Medical (SEM)
Rolling One-Year Beta: 0.64
With a nationwide network spanning 46 states and over 2,700 healthcare facilities, Select Medical (NYSE:SEM) operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers across the United States.
Why Is SEM Risky?
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Declining admissions over the past two years indicate demand is soft and that the company may need to revise its strategy
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Projected sales decline of 11.6% over the next 12 months indicates demand will continue deteriorating
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Free cash flow margin dropped by 13.2 percentage points over the last five years, implying the company became more capital intensive as competition picked up