Skip to main content

The Globe and Mail

15 low-volatility stocks for the jittery investor

Jupiterimages/Getty Images/Comstock Images

What are we looking for?

Stocks for the nervous.

Low-volatility funds have soared in popularity recently as anxiety-prone investors seek portfolios that won't dip and dive with every ripple in the market. Most of these funds, though, focus on a single measure of volatility.

Story continues below advertisement

With the co-operation of Craig McGee, senior consultant at Morningstar Canada, we went looking for Canadian stocks that are steady performers on a number of key metrics.

How we did it

Mr. McGee used the CPMS Canadian database to search for stocks with low volatility in three vital areas: share price, past earnings and future earnings. Specifically, he screened for the top 15 stocks based on:

-A three-year beta less than 1 (beta is used to measure a stock's volatility; a stock with a beta under 1 tends to move less than the overall market);

-A CPMS grade between A+ and C+ for absolute price volatility (this grade measures the standard deviation of daily returns over the past year; an A+ grade indicates the stocks with lowest volatility);

-A CPMS grade between A+ and C+ for the standard deviation of earnings per share over the past five years;

-A CPMS grade between A+ and C+ for the spread in current year EPS estimates (an A+ grade on this score indicates a low spread);

Story continues below advertisement

-A CPMS grade between A+ and C+ for the spread in next year's EPS estimates.

To ensure adequate diversification, Mr. McGee permitted no more than three stocks from any single sector.

More about Morningstar

Morningstar Inc. provides independent investment research in North America, Europe, Australia and Asia.

Its investment research tool, Morningstar CPMS, provides quantitative North American equity research and portfolio analysis to institutional clients and financial advisers.

CPMS figures cover more than 95 per cent of the investable North American stock market.

Story continues below advertisement

What we found

Mr. McGee looked at how this strategy would have fared from January, 1999, to the end of 2012, assuming the stocks in the portfolio were reselected each year.

He found that the low volatility strategy would have produced an annualized total return of 10.7 per cent, compared with 6.9 per cent for the S&P/TSX Composite Total Return Index.

"This type of strategy is geared more toward downside protection so it would be likely to underperform when riskier assets are in favour," says Mr. McGee.

For safety seeking investors, though, it's definitely worth a look.

Report an error Licensing Options
About the Author

Ian McGugan is a reporter with The Globe and Mail's Report on Business and has been writing about investing, economics and business for more than 20 years. He joined the Globe and Mail in 2010. He has been executive editor of Canadian Business magazine and founding editor of MoneySense magazine. More

Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨