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How Does Investing In Independence Gold Corp (CVE:IGO) Impact Your Portfolio?

If you are looking to invest in Independence Gold Corp’s (TSXV:IGO), or currently own the stock, then you need to understand its beta in order to understand how it can affect the risk of your portfolio. The beta measures IGO’s exposure to the wider market risk, which reflects changes in economic and political factors. Not all stocks are expose to the same level of market risk, and the market as a whole represents a beta of one. A stock with a beta greater than one is expected to exhibit higher volatility resulting from market-wide shocks compared to one with a beta below one.

See our latest analysis for Independence Gold

What is IGO’s market risk?

With a beta of 1.64, Independence Gold is a stock that tends to experience more gains than the market during a growth phase and also a bigger reduction in value compared to the market during a broad downturn. Based on this beta value, IGO may be a stock for investors with a portfolio mainly made up of low-beta stocks. This is because during times of bullish sentiment, you can reap more of the upside with high-beta stocks compared to muted movements of low-beta holdings.

Could IGO’s size and industry cause it to be more volatile?

IGO, with its market capitalisation of CA$5.33M, is a small-cap stock, which generally have higher beta than similar companies of larger size. Moreover, IGO’s industry, metals and mining, is considered to be cyclical, which means it is more volatile than the market over the economic cycle. Therefore, investors may expect high beta associated with small companies, as well as those operating in the metals and mining industry, relative to those more well-established firms in a more defensive industry. This supports our interpretation of IGO’s beta value discussed above. Next, we will examine the fundamental factors which can cause cyclicality in the stock.

TSXV:IGO Income Statement May 10th 18
TSXV:IGO Income Statement May 10th 18

Can IGO’s asset-composition point to a higher beta?

An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive. I examine IGO’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. Given a fixed to total assets ratio of over 30%, IGO seems to be a company which invests a big chunk of its capital on assets that cannot be scaled down on short-notice. As a result, this aspect of IGO indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. Similarly, IGO’s beta value conveys the same message.

What this means for you:

You may reap the gains of IGO’s returns in times of an economic boom. Though the business does have higher fixed cost than what is considered safe, during times of growth, consumer demand may be high enough to not warrant immediate concerns. However, during a downturn, a more defensive stock can cushion the impact of this risk. In order to fully understand whether IGO is a good investment for you, we also need to consider important company-specific fundamentals such as Independence Gold’s financial health and performance track record. I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Is IGO’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.

  2. Past Track Record: Has IGO 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 IGO’s historicals for more clarity.

  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.


To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned.

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