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. Keeping that in mind, here are three low-volatility stocks to steer clear of and a few better alternatives.
Portillo's (PTLO)
Rolling One-Year Beta: 0.68
Begun as a Chicago hot dog stand in 1963, Portillo’s (NASDAQ: PTLO) is a casual restaurant chain that serves Chicago-style hot dogs and beef sandwiches as well as fries and shakes.
Why Does PTLO Give Us Pause?
- Lagging same-store sales over the past two years suggest it might have to change its pricing and marketing strategy to stimulate demand
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of -0.2% for the last two years
- High net-debt-to-EBITDA ratio of 6× could force the company to raise capital at unfavorable terms if market conditions deteriorate
At $11.35 per share, Portillo's trades at 31.3x forward P/E. Dive into our free research report to see why there are better opportunities than PTLO.
Array (ARRY)
Rolling One-Year Beta: 0.46
Going public in October 2020, Array (NASDAQ: ARRY) is a global manufacturer of ground-mounting tracking systems for utility and distributed generation solar energy projects.
Why Do We Pass on ARRY?
- Declining unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Cash burn makes us question whether it can achieve sustainable long-term growth
- Shrinking returns on capital from an already weak position reveal that neither previous nor ongoing investments are yielding the desired results
Array’s stock price of $5.54 implies a valuation ratio of 8.5x forward P/E. To fully understand why you should be careful with ARRY, check out our full research report (it’s free).
Brookdale (BKD)
Rolling One-Year Beta: 0.24
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 Do We Think BKD Will Underperform?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 4.8% annually over the last five years
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 22.1% annually, worse than its revenue
- Unfavorable liquidity position could lead to additional equity financing that dilutes shareholders
Brookdale is trading at $6.41 per share, or 3.4x forward EV-to-EBITDA. Check out our free in-depth research report to learn more about why BKD doesn’t pass our bar.
Stocks We Like More
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 6 Stocks for this week. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.
Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.
