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How Does MBIA Inc (NYSE:MBI) Affect Your Portfolio Returns?

Gavin Beck

If you are looking to invest in MBIA Inc’s (NYSE:MBI), 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 MBI’s exposure to the wider market risk, which reflects changes in economic and political factors. Different characteristics of a stock expose it to various levels of market risk, and the broad market index represents a beta value of one. Any stock with a beta of greater than one is considered more volatile than the market, and those with a beta less than one is generally less volatile.

See our latest analysis for MBIA

What does MBI’s beta value mean?

MBIA’s five-year beta of 2.44 means that the company’s value will swing up by more than the market during prosperous times, but also drop down by more in times of downturns. This level of volatility indicates bigger risk for investors who passively invest in the stock market index. Based on this beta value, MBI 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.

Does MBI’s size and industry impact the expected beta?

MBI, with its market capitalisation of USD $688.33M, is a small-cap stock, which generally have higher beta than similar companies of larger size. In addition to size, MBI also operates in the insurance industry, which has commonly demonstrated strong reactions to market-wide shocks. As a result, we should expect higher beta for small-cap stocks in a cyclical industry compared to larger stocks in a defensive industry. This is consistent with MBI’s individual beta value we discussed above.

NYSE:MBI Income Statement Jan 6th 18

Can MBI’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 test MBI’s ratio of fixed assets to total assets in order to determine how high the risk is associated with this type of constraint. Considering fixed assets is virtually non-existent in MBI’s operations, it has low dependency on fixed costs to generate revenue. Thus, we can expect MBI to be more stable in the face of market movements, relative to its peers of similar size but with a higher portion of fixed assets on their books. However, this is the opposite to what MBI’s actual beta value suggests, which is higher stock volatility relative to the market.

What this means for you:

Are you a shareholder? You could benefit from higher returns during times of economic growth. However, in times of a downturn, it may be safe to look at a more defensive stock which can cushion the impact of lower demand. It’s always wise to take into account your portfolio sensitivity to the market before you invest in MBI, as well as where we are in the current economic cycle. For next steps, take a look at MBI’s outlook to see what analysts are expecting for the stock on our free analysis plaform here.

Are you a potential investor? Before you buy MBI, you should look into its fundamental factors such as its current valuation and financial health. Take into account your portfolio sensitivity to the market before you invest in the stock, as well as where we are in the current economic cycle. MBI may be a great investment during times of economic growth. You can examine these factors in our free fundamental research report for MBI 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.