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A stock with low volatility can be reassuring, but it doesn’t always mean strong long-term performance. Investors who prioritize stability may miss out on higher-reward opportunities elsewhere.

Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match. The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.

Even if they go mostly unnoticed, industrial businesses are the backbone of our country. But they are at the whim of volatile macroeconomic factors that influence capital spending (like interest rates), and the market seems convinced that demand will slow. Due to this bearish outlook, the industry has tumbled by 10.4% over the past six months. This drawdown was worse than the S&P 500’s 2% decline.

Stocks trading between $10 and $50 can be particularly interesting as they frequently represent businesses that have survived their early challenges. However, investors should remain vigilant as some may still have unproven business models, leaving them vulnerable to the ebbs and flows of the broader market.

While strong cash flow is a key indicator of stability, it doesn’t always translate to superior returns. Some cash-heavy businesses struggle with inefficient spending, slowing demand, or weak competitive positioning.

Generating cash is essential for any business, but not all cash-rich companies are great investments. Some produce plenty of cash but fail to allocate it effectively, leading to missed opportunities.

Market swings can be tough to stomach, and volatile stocks often experience exaggerated moves in both directions. While many thrive during risk-on environments, many also struggle to maintain investor confidence when the ride gets bumpy.