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People’s Utah Bancorp (NASDAQ:PUB): How Does It Impact Your Portfolio?

Arjun Bhatia

If you own shares in People’s Utah Bancorp (NASDAQ:PUB) 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. First, we have company specific volatility, which is the price gyrations of an individual stock. Holding at least 8 stocks can reduce this kind of risk across a 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 is a widely used metric to measure a stock’s exposure to market risk (volatility). Before we go on, it’s worth noting that Warren Buffett pointed out in his 2014 letter to shareholders that ‘volatility is far from synonymous with risk.’ Having said that, beta can still be rather useful. The first thing to understand about beta is 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.

View our latest analysis for People’s Utah Bancorp

What does PUB’s beta value mean to investors?

Given that it has a beta of 0.89, we can surmise that the People’s Utah Bancorp share price has not been strongly impacted by broader market volatility (over the last 5 years). 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 0.89. Beta is worth considering, but it’s also important to consider whether People’s Utah Bancorp is growing earnings and revenue. You can take a look for yourself, below.

NasdaqCM:PUB Income Statement Export September 6th 18

Could PUB’s size cause it to be more volatile?

With a market capitalisation of US$680.0m, People’s Utah Bancorp is a small cap stock. However, it is big enough to catch the attention of professional investors. Small companies can have a low beta value when company specific factors outweigh the influence of overall market volatility. That might be happening here.

What this means for you:

One potential advantage of owning low beta stocks like People’s Utah Bancorp is that your overall portfolio won’t be too sensitive to overall market movements. However, this can be a blessing or a curse, depending on what’s happening in the broader market. In order to fully understand whether PUB is a good investment for you, we also need to consider important company-specific fundamentals such as People’s Utah Bancorp’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for PUB’s future growth? Take a look at our free research report of analyst consensus for PUB’s outlook.
  2. Past Track Record: Has PUB 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 PUB’s historicals for more clarity.
  3. Other Interesting Stocks: It’s worth checking to see how PUB 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.