U.S. Markets open in 2 hrs 47 mins

Before You Buy Fortress Transportation and Infrastructure Investors LLC (NYSE:FTAI), Consider Its Volatility

Simply Wall St

If you own shares in Fortress Transportation and Infrastructure Investors LLC (NYSE:FTAI) then it's worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. 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 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 mimic the volatility of the market quite closely, while others demonstrate muted, exagerrated or uncorrelated price movements. Beta can be a useful tool to understand how much a stock is influenced by market risk (volatility). However, Warren Buffett said 'volatility is far from synonymous with risk' in his 2014 letter to investors. So, while useful, beta is not the only metric to consider. To use beta as an investor, you must first understand that the overall market has a beta of 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 Fortress Transportation and Infrastructure Investors

What we can learn from FTAI's beta value

As it happens, Fortress Transportation and Infrastructure Investors has a five year beta of 1.06. This is fairly close to 1, so the stock has historically shown a somewhat similar level of volatility as the market. If the future looks like the past, we could therefore consider it likely that the stock price will experience share price volatility that is roughly similar to the overall market. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Fortress Transportation and Infrastructure Investors's revenue and earnings in the image below.

NYSE:FTAI Income Statement, November 12th 2019

How does FTAI's size impact its beta?

With a market capitalisation of US$1.4b, Fortress Transportation and Infrastructure Investors is a small cap stock. However, it is big enough to catch the attention of professional investors. Small companies often have a high beta value because the stock price can move on relatively low capital flows. So it's interesting to note that this stock historically has a beta value quite close to one.

What this means for you:

Fortress Transportation and Infrastructure Investors has a beta value quite close to that of the overall market. That doesn't tell us much on its own, so it is probably worth considering whether the company is growing, if you're looking for stocks that will go up more than the overall market. In order to fully understand whether FTAI is a good investment for you, we also need to consider important company-specific fundamentals such as Fortress Transportation and Infrastructure Investors’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

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