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How Does Investing In Joules Group Plc (LON:JOUL) Impact The Volatility Of Your Portfolio?

If you're interested in Joules Group Plc (LON:JOUL), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.

Some stocks are more sensitive to general market forces than others. Beta is a widely used metric to measure a stock's exposure to market risk (volatility). Before we go on, it's worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that 'volatility is far from synonymous with risk.' Having said that, beta can still be rather useful. The first thing to understand about beta is that the beta of the overall market is one. A stock with a beta greater than one is more sensitive to broader market movements than a stock with a beta of less than one.

See our latest analysis for Joules Group

What JOUL's beta value tells investors

Given that it has a beta of 1.31, we can surmise that the Joules Group share price has been fairly sensitive to market volatility (over the last 5 years). If the past is any guide, we would expect that Joules Group shares will rise quicker than the markets in times of optimism, but fall faster in times of pessimism. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Joules Group fares in that regard, below.

AIM:JOUL Income Statement, August 20th 2019
AIM:JOUL Income Statement, August 20th 2019

Could JOUL's size cause it to be more volatile?

With a market capitalisation of UK£223m, Joules Group is a very small company by global standards. It is quite likely to be unknown to most investors. Relatively few investors can influence the price of a smaller company, compared to a large company. This could explain the high beta value, in this case.

What this means for you:

Since Joules Group has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether JOUL is a good investment for you, we also need to consider important company-specific fundamentals such as Joules Group’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

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  1. Future Outlook: What are well-informed industry analysts predicting for JOUL’s future growth? Take a look at our free research report of analyst consensus for JOUL’s outlook.

  2. Past Track Record: Has JOUL been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of JOUL's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how JOUL measures up against other companies on valuation. You could start with this free list of prospective options.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.