How Does Investing In United States Lime & Minerals Inc (NASDAQ:USLM) Impact Your Portfolio?
If you own shares in United States Lime & Minerals Inc (NASDAQ:USLM) 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. 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 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. 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.
See our latest analysis for United States Lime & Minerals
What does USLM’s beta value mean to investors?
With a beta of 0.95, (which is quite close to 1) the share price of United States Lime & Minerals has historically been about as voltile as the broader market. While history does not always repeat, this may indicate that the stock price will continue to be exposed to market risk, albeit not overly so. Beta is worth considering, but it’s also important to consider whether United States Lime & Minerals is growing earnings and revenue. You can take a look for yourself, below.
Does USLM’s size influence the expected beta?
United States Lime & Minerals is a noticeably small company, with a market capitalisation of US$424.4m. Most companies this size are not always actively traded. Companies this small are usually more volatile than the market, whether or not that volatility is correlated. Therefore, it’s a bit surprising to see that this stock has a beta value so close to the overall market.
What this means for you:
United States Lime & Minerals 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. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as United States Lime & Minerals’s financial health and performance track record. I urge you to continue your research by taking a look at the following:
Future Outlook: What are well-informed industry analysts predicting for USLM’s future growth? Take a look at our free research report of analyst consensus for USLM’s outlook.
Past Track Record: Has USLM 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 USLM’s historicals for more clarity.
Other Interesting Stocks: It’s worth checking to see how USLM measures up against other companies on valuation. You could start with this free list of prospective options.
To help readers see past 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. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
