Stability is great, but low-volatility stocks may struggle to deliver market-beating returns over time as they sometimes underperform during bull markets.
Luckily for you, StockStory helps you navigate which companies are truly worth holding. Keeping that in mind, here are three low-volatility stocks to steer clear of and a few better alternatives.
General Motors (GM)
Rolling One-Year Beta: 0.81
Founded in 1908 by William C. Durant, General Motors (NYSE:GM) offers a range of vehicles and automobiles through brands such as Chevrolet, Buick, GMC, and Cadillac.
Why Do We Think Twice About GM?
- Underwhelming unit sales over the past two years indicate demand is soft and that the company may need to revise its strategy
- Free cash flow margin shrank by 7.9 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
- High net-debt-to-EBITDA ratio of 5× increases the risk of forced asset sales or dilutive financing if operational performance weakens
At $52.63 per share, General Motors trades at 5.7x forward P/E. Dive into our free research report to see why there are better opportunities than GM.
KB Home (KBH)
Rolling One-Year Beta: 0.50
The first homebuilder to be listed on the NYSE, KB Home (NYSE:KB) is a homebuilding company targeting the first-time home buyer and move-up buyer markets.
Why Do We Steer Clear of KBH?
- Sales pipeline suggests its future revenue growth won’t meet our standards as its backlog averaged 20.8% declines over the past two years
- Sales are expected to decline once again over the next 12 months as it continues working through a challenging demand environment
- Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable
KB Home is trading at $55.57 per share, or 7.9x forward P/E. Read our free research report to see why you should think twice about including KBH in your portfolio.
First American Financial (FAF)
Rolling One-Year Beta: 0.57
Tracing its roots back to 1889 when California was experiencing its first major real estate boom, First American Financial (NYSE:FAF) provides title insurance, settlement services, and risk solutions for residential and commercial real estate transactions across the United States and internationally.
Why Should You Sell FAF?
- Insurance products are facing market challenges during this cycle, as seen in its flat net premiums earned over the last two years
- Costs have risen faster than its revenue over the last four years, causing its pre-tax profit margin to decline by 12.1 percentage points
- Performance over the past five years shows each sale was less profitable, as its earnings per share fell by 1.8% annually
First American Financial’s stock price of $60.25 implies a valuation ratio of 1.1x forward P/B. Check out our free in-depth research report to learn more about why FAF doesn’t pass our bar.
High-Quality Stocks for All Market Conditions
Trump’s April 2024 tariff bombshell triggered a massive market selloff, but stocks have since staged an impressive recovery, leaving those who panic sold on the sidelines.
Take advantage of the rebound 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. Find your next big winner with StockStory today. Find your next big winner with StockStory today
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