A stock with low volatility can be reassuring, but it doesn’t always mean strong long-term performance. Investors who prioritize stability may miss out on higher-reward opportunities elsewhere.
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.
Churchill Downs (CHDN)
Rolling One-Year Beta: 0.49
Famous for hosting the Kentucky Derby, Churchill Downs (NASDAQ: CHDN) operates a horse racing, online wagering, and gaming entertainment business in the United States.
Why Are We Wary of CHDN?
- Estimated sales growth of 4.8% for the next 12 months implies demand will slow from its two-year trend
- Poor free cash flow margin of 4.5% for the last two years limits its freedom to invest in growth initiatives, execute share buybacks, or pay dividends
- ROIC of 7.8% reflects management’s challenges in identifying attractive investment opportunities
Churchill Downs’s stock price of $100.95 implies a valuation ratio of 15.5x forward P/E. Dive into our free research report to see why there are better opportunities than CHDN.
Malibu Boats (MBUU)
Rolling One-Year Beta: 0.54
Founded in California in 1982, Malibu Boats (NASDAQ: MBUU) is a manufacturer of high-performance sports boats and luxury watercrafts.
Why Should You Sell MBUU?
- Number of boats sold has disappointed over the past two years, indicating weak demand for its offerings
- Earnings per share fell by 28.9% annually over the last five years while its revenue was flat, showing each sale was less profitable
- Diminishing returns on capital from an already low starting point show that neither management’s prior nor current bets are going as planned
Malibu Boats is trading at $31.85 per share, or 10.8x forward P/E. If you’re considering MBUU for your portfolio, see our FREE research report to learn more.
Iridium (IRDM)
Rolling One-Year Beta: 0.78
With a constellation of 66 low-earth orbit satellites providing coverage to every inch of the planet, Iridium Communications (NASDAQ: IRDM) operates a global satellite network that provides voice and data services to customers in remote areas where traditional telecommunications are unavailable.
Why Does IRDM Give Us Pause?
- Revenue base of $841.7 million puts it at a disadvantage compared to larger competitors exhibiting economies of scale
- Free cash flow margin shrank by 3.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- Below-average returns on capital indicate management struggled to find compelling investment opportunities
At $30.14 per share, Iridium trades at 20.4x forward P/E. Read our free research report to see why you should think twice about including IRDM in your portfolio.
High-Quality Stocks for All Market Conditions
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 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-small-cap company Exlservice (+354% 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
