Yahoo Lifestyle Does The Mueller Industries, Inc. (NYSE:MLI) Share Price Tend To Follow The Market?
Want to participate in a research study? Help shape the future of investing tools and earn a $60 gift card!
Anyone researching Mueller Industries, Inc. (NYSE:MLI) might want to consider the historical volatility of the share price. Modern finance theory considers volatility to be a measure of risk, and there are two main types of price volatility. 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 other type, which cannot be diversified away, is the volatility of the entire market. Every stock in the market is exposed to this volatility, which is linked to the fact that stocks prices are correlated in an efficient market.
Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. 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.
View our latest analysis for Mueller Industries
What does MLI's beta value mean to investors?
Given that it has a beta of 1.47, we can surmise that the Mueller Industries share price has been fairly sensitive to market volatility (over the last 5 years). Based on this history, investors should be aware that Mueller Industries are likely to rise strongly in times of greed, but sell off in times of fear. Many would argue that beta is useful in position sizing, but fundamental metrics such as revenue and earnings are more important overall. You can see Mueller Industries's revenue and earnings in the image below.
Could MLI's size cause it to be more volatile?
Mueller Industries is a small cap stock with a market capitalisation of US$1.8b. Most companies this size are actively traded. It's not particularly surprising that it has a higher beta than the overall market. That's because it takes less money to influence the share price of a smaller company, than a bigger company.
What this means for you:
Since Mueller Industries has a reasonably high beta, it's worth considering why it is so heavily influenced by broader market sentiment. For example, it might be a high growth stock or have a lot of operating leverage in its business model. In order to fully understand whether MLI is a good investment for you, we also need to consider important company-specific fundamentals such as Mueller Industries’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 MLI’s future growth? Take a look at our free research report of analyst consensus for MLI’s outlook.
Past Track Record: Has MLI 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 MLI's historicals for more clarity.
Other Interesting Stocks: It's worth checking to see how MLI 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.
