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If you’re interested in Bertrandt Aktiengesellschaft (FRA:BDT), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.
Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that ‘Volatility is far from synonymous with risk’, beta is still a useful factor to consider. To make good use of it you must first know that the beta of the overall market is one. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.
Check out our latest analysis for Bertrandt
What does BDT’s beta value mean to investors?
Zooming in on Bertrandt, we see it has a five year beta of 0.88. This is below 1, so historically its share price has been rather independent from the market. This means that — if history is a guide — buying the stock would reduce the impact of overall market volatility in many portfolios (depending on the beta of the portfolio, of course). Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Bertrandt’s revenue and earnings in the image below.
Could BDT’s size cause it to be more volatile?
Bertrandt is a small company, but not tiny and little known. It has a market capitalisation of €825.0m, which means it would be on the radar of intstitutional investors. Small cap stocks ofthen have a higher beta than the overall market. However, small companies can also be strongly impacted by company specific developments, which can move the share price in ways that are unrelated to the broader market. That could explain why this one has a low beta value.
What this means for you:
Since Bertrandt is not heavily influenced by market moves, its share price is probably far more dependend on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. In order to fully understand whether BDT is a good investment for you, we also need to consider important company-specific fundamentals such as Bertrandt’s financial health and performance track record. I highly recommend you dive deeper by considering the following: