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Should You Be Holding Akastor ASA (OB:AKA) Right Now?

For Akastor ASA’s (OB:AKA) shareholders, and also potential investors in the stock, understanding how the stock’s risk and return characteristics can impact your portfolio is important. AKA is exposed to market-wide risk, which arises from investing in the stock market. This risk reflects changes in economic and political factors that affects all stocks, and is measured by its beta. Not all stocks are expose to the same level of market risk, and the broad market index represents a beta value 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.

View our latest analysis for Akastor

What is AKA’s market risk?

With a beta of 1.01, Akastor 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, AKA can help magnify your portfolio return, especially if it is predominantly made up of low-beta stocks. If the market is going up, a higher exposure to the upside from a high-beta stock can push up your portfolio return.

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

With a market cap of ØRE4.90B, AKA falls within the small-cap spectrum of stocks, which are found to experience higher relative risk compared to larger companies. Furthermore, the company operates in the energy services industry, which has been found to have high sensitivity 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 supports our interpretation of AKA’s beta value discussed above. Fundamental factors can also drive the cyclicality of the stock, which we will take a look at next.

OB:AKA Income Statement Jun 5th 18
OB:AKA Income Statement Jun 5th 18

Can AKA’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 AKA’s ratio of fixed assets to total assets to see whether the company is highly exposed to the risk of this type of constraint. With a fixed-assets-to-total-assets ratio of greater than 30%, AKA appears to be a company that invests a large amount of capital in assets that are hard to scale down on short-notice. As a result, this aspect of AKA indicates a higher beta than a similar size company with a lower portion of fixed assets on their balance sheet. Similarly, AKA’s beta value conveys the same message.

What this means for you:

You may reap the gains of AKA’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. What I have not mentioned in my article here are important company-specific fundamentals such as Akastor’s financial health and performance track record. I urge you to complete your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for AKA’s future growth? Take a look at our free research report of analyst consensus for AKA’s outlook.

  2. Past Track Record: Has AKA 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 AKA’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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