5 Top PowerRatings Dow Stocks for Investors: DIS, JNJ, MMM, IBM, KO
Got Dow stocks? High Long Term PowerRatings and low volatility mark these five blue chip stocks as names active investors should be considering.
In an article titled “Historical Volatility: The Holy Grail?” Larry Connors and his research team discovered that while high volatility is an excellent attribute in a stock chosen for short term trading, high volatility is a problem when it comes to longer-term investment and position trading.
Specifically, Connors and his team concluded, that stocks with low historical volatility have outperformed stocks with high historical volatility after one year. This research involved over 11,000 different stocks between 1995 and 2007.
Moreover the team discovered that when you separated the top 20% most volatile stocks (again, as measured by historical volatility) and the bottom 20% least volatile stocks, the differences were all the more apparent. Connors learned that the most volatile stocks were higher one year later less than 43% of the time, with average annual gains of about 7%.
By contrast, the least volatile stocks in the survey group were higher one year later more than 74% of the time. These less volatile stocks also outperformed the high volatility stocks after one year, averaging nearly 15% in gains.
Why is this the case? This morning, watching legendary investor Warren Buffet answer questions about his “investing trip” to Europe, a few of the reasons why became all the more clear. As Connors observes in his article:
“Companies that are stable and are usually performing in-line with expectations, tend to have lower volatilities. This is logical, as these companies are usually more predictable. Companies that have a great deal of uncertainty to them … tend to have higher volatility as more is unknown.”
So, if you were looking for stable companies, with predictable performances and, likely, lower volatilities, would not the Dow Jones Industrial Average, home of the stodgiest and most blue-blooded of blue chip stocks be the place to look?
The five Dow stocks in today’s report all are among these kinds of low volatility stocks — with high Long Term PowerRatings — that our research suggests are likely to be both more reliable and better performers than the average stock. All five of these stocks have Long Term PowerRatings of 8. Our research indicates that stocks with Long Term PowerRatings of 8 have been higher one year later more than 74% of the time. 8-rated stocks have also tended to be higher, on average, by more than 17% in a year’s time.
Walt Disney [DIS@DIS]
Johnson & Johnson [JNJ@JNJ]
3M [MMM@MMM]
International Business Machine [IBM@IBM]
Coca Cola [KO@KO]
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David Penn is Senior Editor of PowerRatings.net.