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. That said, here are three low-volatility stocks to avoid and some better opportunities instead.
Kraft Heinz (KHC)
Rolling One-Year Beta: -0.06
The result of a 2015 mega-merger between Kraft and Heinz, Kraft Heinz (NASDAQ:KHC) is a packaged foods giant whose products span coffee to cheese to packaged meat.
Why Do We Think KHC Will Underperform?
- Falling unit sales over the past two years suggest it might have to lower prices to stimulate growth
- Projected sales decline of 1.6% for the next 12 months points to an even tougher demand environment ahead
- Expenses have increased as a percentage of revenue over the last year as its operating margin fell by 11.2 percentage points
Kraft Heinz’s stock price of $26.75 implies a valuation ratio of 10x forward P/E. Read our free research report to see why you should think twice about including KHC in your portfolio.
Simply Good Foods (SMPL)
Rolling One-Year Beta: 0.45
Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ:SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.
Why Are We Hesitant About SMPL?
- Subscale operations are evident in its revenue base of $1.41 billion, meaning it has fewer distribution channels than its larger rivals
- 3.1 percentage point decline in its free cash flow margin over the last year reflects the company’s increased investments to defend its market position
- Low returns on capital reflect management’s struggle to allocate funds effectively
Simply Good Foods is trading at $33.13 per share, or 16.6x forward P/E. Dive into our free research report to see why there are better opportunities than SMPL.
CBRE (CBRE)
Rolling One-Year Beta: 0.85
Established in 1906, CBRE (NYSE:CBRE) is one of the largest commercial real estate services firms in the world.
Why Do We Pass on CBRE?
- Annual sales growth of 8.3% over the last five years lagged behind its consumer discretionary peers as its large revenue base made it difficult to generate incremental demand
- Subpar operating margin of 4% constrains its ability to invest in process improvements or effectively respond to new competitive threats
- Ability to fund investments or reward shareholders with increased buybacks or dividends is restricted by its weak free cash flow margin of 2.6% for the last two years
At $127.97 per share, CBRE trades at 21x forward P/E. To fully understand why you should be careful with CBRE, check out our full research report (it’s free).
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 Growth Stocks for this month. 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.