Is Lippo Malls Indonesia Retail Trust (SGX:D5IU) A Volatile Stock?
If you're interested in Lippo Malls Indonesia Retail Trust (SGX:D5IU), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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. 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.
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See our latest analysis for Lippo Malls Indonesia Retail Trust
What does D5IU's beta value mean to investors?
Zooming in on Lippo Malls Indonesia Retail Trust, 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. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Lippo Malls Indonesia Retail Trust fares in that regard, below.
Could D5IU's size cause it to be more volatile?
Lippo Malls Indonesia Retail Trust is a rather small company. It has a market capitalisation of S$622m, which means it is probably under the radar of most investors. Very small companies often have a low beta value because their share prices are not well correlated with market volatility. This could be because the price is reacting to company specific events. Alternatively, the shares may not be actively traded.
What this means for you:
Since Lippo Malls Indonesia Retail Trust is not heavily influenced by market moves, its share price is probably far more dependend on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. In order to fully understand whether D5IU is a good investment for you, we also need to consider important company-specific fundamentals such as Lippo Malls Indonesia Retail Trust’s financial health and performance track record. I highly recommend you dive deeper by considering the following:
Future Outlook: What are well-informed industry analysts predicting for D5IU’s future growth? Take a look at our free research report of analyst consensus for D5IU’s outlook.
Past Track Record: Has D5IU 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 D5IU's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how D5IU 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.
