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. Keeping that in mind, here are three low-volatility stocks to avoid and some better opportunities instead.
RenaissanceRe (RNR)
Rolling One-Year Beta: 0.01
Born in Bermuda after the devastating Hurricane Andrew created a crisis in the catastrophe insurance market, RenaissanceRe (NYSE: RNR) provides property, casualty, and specialty reinsurance and insurance solutions to customers worldwide, primarily through intermediaries.
Why Does RNR Fall Short?
- Stagnant net premiums earned over the last two years suggest the firm needs alternative growth strategies
- Estimated sales decline of 10.5% for the next 12 months implies a challenging demand environment
- Earnings per share lagged its peers over the last two years as they only grew by 11.6% annually
RenaissanceRe’s stock price of $331.27 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including RNR in your portfolio.
Hamilton Insurance Group (HG)
Rolling One-Year Beta: -0.10
Founded in 2013 and operating through three distinct underwriting platforms across four countries, Hamilton Insurance Group (NYSE: HG) operates global specialty insurance and reinsurance platforms across Lloyd's, Ireland, Bermuda, and the United States.
Why Does HG Worry Us?
- Demand is forecasted to shrink as its estimated sales for the next 12 months are flat
- Expenses have increased as a percentage of revenue over the last two years as its pre-tax profit margin fell by 1.5 percentage points
- Incremental sales over the last two years were less profitable as its 14% annual earnings per share growth lagged its revenue gains
Hamilton Insurance Group is trading at $35.59 per share, or 1.1x forward P/B. If you’re considering HG for your portfolio, see our FREE research report to learn more.
Borr Drilling (BORR)
Rolling One-Year Beta: 0.05
Operating one of the world's youngest jack-up fleets with an average age under eight years, Borr Drilling (NYSE: BORR) operates jack-up rigs that drill oil and gas wells in shallow waters up to 400 feet deep for exploration and production companies.
Why Are We Wary of BORR?
- Subscale operations are evident in its revenue base of $1.02 billion, meaning it has fewer distribution channels than its larger rivals
- Negative free cash flow raises questions about the return timeline for its investments
At $4.60 per share, Borr Drilling trades at 8.6x forward EV-to-EBITDA. To fully understand why you should be careful with BORR, check out our full research report (it’s free).
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