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.
Olo (OLO)
Rolling One-Year Beta: 0.89
Founded by Noah Glass, who wanted to get a cup of coffee faster on his way to work, Olo (NYSE: OLO) provides restaurants and food retailers with software to manage food orders and delivery.
Why Are We Hesitant About OLO?
- Sky-high servicing costs result in an inferior gross margin of 54.7% that must be offset through increased usage
- Rapid expansion strategy came at the expense of operating margin profitability
- Poor free cash flow margin of 7.4% for the last year limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
At $10.12 per share, Olo trades at 5.1x forward price-to-sales. To fully understand why you should be careful with OLO, check out our full research report (it’s free).
Brookdale (BKD)
Rolling One-Year Beta: 0.27
With a network of over 650 communities serving approximately 59,000 residents across 41 states, Brookdale Senior Living (NYSE: BKD) operates senior living communities across the United States, offering independent living, assisted living, memory care, and continuing care retirement communities.
Why Is BKD Risky?
- Sales tumbled by 4.8% annually over the last five years, showing market trends are working against its favor during this cycle
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Brookdale’s stock price of $6.84 implies a valuation ratio of 3.5x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why BKD doesn’t pass our bar.
Rithm Capital (RITM)
Rolling One-Year Beta: 0.53
Evolving from a mortgage-focused REIT to a diversified asset manager with its 2023 acquisition of Sculptor Capital, Rithm Capital (NYSE: RITM) is a global asset manager focused on real estate, credit, and financial services that invests in mortgage servicing rights, residential properties, and loan portfolios.
Why Are We Out on RITM?
- Sales trends were unexciting over the last two years as its 4.7% annual growth was below the typical bank company
- Earnings per share were flat over the last five years while its revenue grew, showing its incremental sales were less profitable
- Muted 1.5% annual tangible book value per share growth over the last two years shows its capital generation lagged behind its bank peers
Rithm Capital is trading at $11.73 per share, or 0.9x forward P/B. If you’re considering RITM for your portfolio, see our FREE research report to learn more.
High-Quality Stocks for All Market Conditions
Market indices reached historic highs following Donald Trump’s presidential victory in November 2024, but the outlook for 2025 is clouded by new trade policies that could impact business confidence and growth.
While this has caused many investors to adopt a "fearful" wait-and-see approach, we’re leaning into our best ideas that can grow regardless of the political or macroeconomic climate. Take advantage of Mr. Market by checking out our Top 5 Strong Momentum Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today for free. Find your next big winner with StockStory today. Find your next big winner with StockStory today
