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How Does Investing In BancFirst Corporation (NASDAQ:BANF) Impact The Volatility Of Your Portfolio?

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  • BANF

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Anyone researching BancFirst Corporation (NASDAQ:BANF) might want to consider the historical volatility of the share price. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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 see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated 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. Any stock with a beta of greater than one is considered more volatile than the market, while those with a beta below one are either less volatile or poorly correlated with the market.

View our latest analysis for BancFirst

What we can learn from BANF's beta value

Zooming in on BancFirst, we see it has a five year beta of 0.84. This is below 1, so historically its share price has been rather independent from the market. This suggests that including it in your portfolio will reduce volatility arising from broader market movements, assuming your portfolio's weighted average beta is higher than 0.84. Beta is worth considering, but it's also important to consider whether BancFirst is growing earnings and revenue. You can take a look for yourself, below.

NasdaqGS:BANF Income Statement, July 3rd 2019
NasdaqGS:BANF Income Statement, July 3rd 2019

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

BancFirst is a small company, but not tiny and little known. It has a market capitalisation of US$1.9b, which means it would be on the radar of intstitutional investors. Small companies can have a low beta value when company specific factors outweigh the influence of overall market volatility. That might be happening here.

What this means for you:

One potential advantage of owning low beta stocks like BancFirst is that your overall portfolio won't be too sensitive to overall market movements. However, this can be a blessing or a curse, depending on what's happening in the broader market. In order to fully understand whether BANF is a good investment for you, we also need to consider important company-specific fundamentals such as BancFirst’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 BANF’s future growth? Take a look at our free research report of analyst consensus for BANF’s outlook.

  2. Past Track Record: Has BANF 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 BANF's historicals for more clarity.

  3. Other Interesting Stocks: It's worth checking to see how BANF 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.