In September’s volatile market, low-volatility stocks are good investments because they reduce risk while still providing competitive returns. Therefore, income investors might consider buying low volatility stocks such as Merck & Co., Inc. (MRK), George Weston Limited (WNGRF), and Unum Group (UNM). These stocks tend to perform better in downturns, offering a more stable and smoother investment experience.
Low volatility stocks offer a smoother investment ride by reducing downside risks during market downturns. They help protect your portfolio from large losses while still delivering long-term competitive returns. This strategy can be especially useful in uncertain economic times, as it minimizes extreme swings and keeps your investments more stable over time.
The U.S. economy shows easing inflation but some stickiness in core prices, especially in housing and services. Moreover, with market expectations for interest rate cuts swing between a quarter-point and half-point cut, low volatility stocks may offer stability as the Federal Reserve cautiously manages rate reductions. This makes it a favorable time for risk-averse investors seeking steady returns.
Moreover, with stocks trading lower, U.S. treasury prices declining, and the dollar rising, low-volatility stocks may provide a safeguard against economic unpredictability. Now, let’s analyze the fundamental aspects of the three abovementioned low volatility stocks.
Merck & Co., Inc. (MRK)
MRK operates as a healthcare company worldwide. It operates through two segments: Pharmaceutical and Animal Health. The company's offerings include global healthcare solutions in human health pharmaceuticals (oncology, immunology) and preventive vaccines. The Animal Health segment provides veterinary pharmaceuticals, vaccines, and digital health products.
On September 3, 2024, MRK announced that the European Commission approved KEYTRUDA with Padcev for first-line treatment of adults with unresectable or metastatic urothelial carcinoma. This approval introduces a new potential standard of care in the European Union.
On August 26, 2024, MRK announced that the European Commission approved WINREVAIR (sotatercept) for treating pulmonary arterial hypertension (PAH) in adults. This is the first activin signaling inhibitor therapy for PAH approved in Europe.
In terms of the trailing-12-month EBIT margin, MRK’s 31.64% is considerably higher than the 2.73% industry average. Likewise, its 18.88% trailing-12-month levered FCF margin is significantly higher than the 1.48% industry average. Furthermore, its 75.79% trailing-12-month gross profit margin is 31.1% higher than the 57.83% industry average.
During the second quarter that ended June 30, 2024, MRK’s total sales rose 7.2% year-over-year to $16.11 billion. MRK’s KEYTRUDA sales increased 15.9% year-over-year to $7.27 billion. Similarly, the company’s non-GAAP net income and non-GAAP EPS were $5.81 billion and $2.28, compared to a non-GAAP net loss of $5.22 billion and $2.06 per share in the same quarter of the prior year, respectively.
Street expects MRK’s revenue for the quarter ending September 30, 2024, to increase 3.6% year-over-year to $16.53 billion. Its EPS for the quarter ending December 31, 2024, is expected to grow considerably year-over-year to $1.91. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past nine months, the stock gained 9.7% to close the last trading session at $117.54. Its 5-year monthly beta is 0.40.
MRK’s POWR Ratings reflect strong prospects. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #5 out of 161 stocks in the Medical – Pharmaceuticals industry. It has an A grade for Quality and a B for Value, Stability, and Sentiment. Click here to see MRK’s Growth and Momentum ratings.
George Weston Limited (WNGRF)
Based in Toronto, Canada, WNGRF provides food and drug retailing and financial services in Canada. The company operates through two segments: Loblaw Companies Limited (Loblaw) and Choice Properties Real Estate Investment Trust (Choice Properties).
In terms of the trailing-12-month Return on Common Equity, WNGRF’s 20.50% is 92.2% higher than the 10.67% industry average. Its 7.99% trailing-12-month Return on Total Capital is 15.1% higher than the 6.94% industry average. Also, the stock’s 1.24x trailing-12-month asset turnover ratio is 45.2% higher than the 0.85x industry average.
WNGRF’s revenue for the second quarter that ended June 15, 2024, increased 1.5% year-over-year to $14.09 billion. Its adjusted EBITDA stood at $1.71 billion, up 4.2% year-over-year.
For the same quarter, the company's adjusted net earnings available to common shareholders of the company and adjusted net earnings per common share grew 4.5% and 9.3% over the prior-year quarter to $394 million and $2.93, respectively.
For the quarter ending September 30, 2024, WNGRF’s revenue is expected to increase 1.6% year-over-year to $13.65 billion. Over the past year, WNGRF’s stock has gained 50.9% to close the last trading session at $167.41. Its 5-year monthly beta is 0.42.
WNGRF’s bright prospects are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Stability and a B for Quality. It is ranked #21 in the Grocery/Big Box Retailers industry. To access the additional grades of WNGRF for Growth, Value, Momentum, and Sentiment, click here.
Unum Group (UNM)
UNM and its subsidiaries provide financial protection benefit solutions primarily internationally. It operates through Unum US, Unum International, Colonial Life, and the Closed Block segment.
On June 18, 2024, UNM launched Unum Broker Connect for Employee Navigator, improving integration and efficiency for brokers. This service simplifies case setup, automates plan creation, and enables smooth data exchange.
In terms of the trailing-12-month Return on Total Capital, UNM’s 8.74% is 26.6% higher than the 6.91% industry average. Its 2.12% trailing-12-month Return on Total Assets is 101.1% higher than the 1.06% industry average. Also, its 13.37% trailing-12-month Return on Common Equity is 29.3% higher than the 10.34% industry average.
UNM’s total net revenue for the second quarter ending June 30, 2024, increased 3.9% year-over-year to $3.23 billion. The company’s after-tax operating income was $411.40 million, or $2.16 per share, up 1% and 4.9% from the year-ago values, respectively. During the same period, the company’s net income stood at $389.50 million, with net income per share at $2.05, up 3.5% year-over-year.
Analysts expect UNM’s EPS for the quarter ending September 30, 2024, to increase 5.4% year-over-year to $2.05. Its revenue for the same quarter is expected to increase 4.5% year-over-year to $3.26 billion. It surpassed the consensus EPS estimates in three of the four trailing quarters. UNM’s stock has gained 24.5% over the past nine months to close the last trading session at $55.62. Its 5-year monthly beta is 0.75.
UNM’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked first out of 8 stocks in the Insurance - Accident & Supplemental industry. It has an A grade for Momentum and a B for Value and Stability. To see UNM’s grades for Growth, Sentiment, and Quality, click here.
What To Do Next?
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MRK shares were trading at $117.80 per share on Monday afternoon, up $2.71 (+2.35%). Year-to-date, MRK has gained 9.39%, versus a 19.02% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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