U.S. Markets closed

American National Insurance Company (NASDAQ:ANAT): What Does Its Beta Value Mean For Your Portfolio?

Simply Wall St

If you're interested in American National Insurance Company (NASDAQ:ANAT), 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. The first category is company specific volatility. This can be dealt with by limiting your exposure to any particular stock. The second sort is caused by the natural volatility of markets, overall. For example, certain macroeconomic events will impact (virtually) all stocks on the market.

Some stocks are more sensitive to general market forces than others. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that 'Volatility is far from synonymous with risk', beta is still a useful factor to consider. To make good use of it you must first know 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.

View our latest analysis for American National Insurance

What we can learn from ANAT's beta value

Zooming in on American National Insurance, we see it has a five year beta of 0.82. This is below 1, so historically its share price has been rather independent from the market. If history is a good guide, owning the stock should help ensure that your portfolio is not overly sensitive to market volatility. 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 American National Insurance fares in that regard, below.

NasdaqGS:ANAT Income Statement, April 10th 2019

How does ANAT's size impact its beta?

American National Insurance is a fairly large company. It has a market capitalisation of US$3.2b, which means it is probably on the radar of most investors. When a large company like this trades with a low beta value, it is often because there is some other systemic factor influencing the share price. For example, commodity prices might influence a mining company strongly, while expectations around dividend payments (and capital expenditure requirements) might have a big impact on utilities.

What this means for you:

The American National Insurance doesn't usually show much sensitivity to the broader market. This could be for a variety of reasons. Typically, smaller companies have a low beta if their share price tends to move a lot due to company specific developments. Alternatively, an strong dividend payer might move less than the market because investors are valuing it for its income stream. In order to fully understand whether ANAT is a good investment for you, we also need to consider important company-specific fundamentals such as American National Insurance’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for ANAT’s future growth? Take a look at our free research report of analyst consensus for ANAT’s outlook.
  2. Past Track Record: Has ANAT 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 ANAT's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how ANAT 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.