3 Low-Volatility Stocks Facing Headwinds

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 steer clear of and a few better alternatives.

Best Buy (BBY)

Rolling One-Year Beta: 0.56

With humble beginnings as a stereo equipment seller, Best Buy (NYSE:BBY) now sells a broad selection of consumer electronics, appliances, and home office products.

Why Does BBY Fall Short?

1. Disappointing same-store sales over the past two years show customers aren’t responding well to its product selection and store experience
2. Gross margin of 22.3% is an output of its commoditized inventory
3. Operating margin of 3.3% falls short of the industry average, and the smaller profit dollars make it harder to react to unexpected market developments

Best Buy is trading at $72.50 per share, or 11x forward P/E. Dive into our free research report to see why there are better opportunities than BBY.

Shyft (SHYF)

Rolling One-Year Beta: 0.91

Notably receiving an order from FedEx for electric vehicles, Shyft (NASDAQ:SHYF) offers specialty vehicles and truck bodies for various industries.

Why Do We Think SHYF Will Underperform?

1. Annual sales declines of 13.7% for the past two years show its products and services struggled to connect with the market during this cycle
2. Free cash flow margin shrank by 6.8 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
3. Diminishing returns on capital suggest its earlier profit pools are drying up

Shyft’s stock price of $9.47 implies a valuation ratio of 9x forward P/E. Check out our free in-depth research report to learn more about why SHYF doesn’t pass our bar.

Labcorp (LH)

Rolling One-Year Beta: 0.36

With over 600 million tests performed annually and involvement in 90% of FDA-approved drugs in 2023, Labcorp (NYSE:LH) provides laboratory testing services and drug development solutions to doctors, hospitals, pharmaceutical companies, and patients worldwide.

Why Are We Hesitant About LH?

1. Core business is underperforming as its organic revenue has disappointed over the past two years, suggesting it might need acquisitions to stimulate growth
2. Expenses have increased as a percentage of revenue over the last five years as its adjusted operating margin fell by 13.3 percentage points
3. Waning returns on capital imply its previous profit engines are losing steam

At $246.27 per share, Labcorp trades at 14.9x forward P/E. Read our free research report to see why you should think twice about including LH in your portfolio.

High-Quality Stocks for All Market Conditions

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