8 Rallying Low-Risk Stocks With Strong Sources Of Profitability

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 |  Includes: ARI, ARR, AWK, AWR, COST, IBI, TWTC, WMT
by: Kapitall

Do you worry about stock volatility when choosing among names? One idea is to consider a stock's recent trading volatility. With this idea in mind, we ran a screen.

We began by screening for low-volatility stocks, with average intra-day volatility over the last month under 2% (meaning, on average, these stocks have traded within a 2% range each day). We then screened for those that are rallying above their 20-day, 50-day, and 200-day moving averages, indicating that these stocks have strong upward momentum.

Then to analyze these companies' profitability, we ran DuPont analysis on the names. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components:

ROE

= (Net Profit/Equity)

= (Net profit/Sales)*(Sales/Assets)*(Assets/Equity)

= (Net Profit margin)*(Asset turnover)*(Leverage ratio)

Because increases in net margin and asset turnover are considered good things, DuPont focuses on companies with these positive characteristics: Increasing ROE along with,

•Decreasing leverage, (i.e. decreasing Asset/Equity ratio)

•Improving asset use efficiency (i.e. increasing Sales/Assets ratio) and improving net profit margin (i.e. increasing Net Income/Sales ratio)

Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

Tool provided by Kapitall.

Do you think these stocks are less risky? Use this list as a starting point for your own analysis.

List sorted by average intra-day volatility over the last month.

1. ARMOUR Residential REIT, Inc. (NYSE:ARR): Market cap at $1.24B, most recent closing price at $6.96. Average intra-day volatility over the last month at 0.95%. The stock is currently trading 1.50% above its 20-day moving average, 3.46% above its 50-day MA, and 7.22% above its 200-day MA. MRQ net profit margin at 84.76% vs. 75.9% y/y. MRQ sales/assets at 0.006 vs. 0.005 y/y. MRQ assets/equity at 10.616 vs. 10.633 y/y.

2. Wal-Mart Stores Inc. (NYSE:WMT): Operates retail stores in various formats worldwide. Market cap at $224.41B, most recent closing price at $65.99. Average intra-day volatility over the last month at 1.32%. The stock is currently trading 5.53% above its 20-day moving average, 8.23% above its 50-day MA, and 14.33% above its 200-day MA. MRQ net profit margin at 3.31% vs. 3.26% y/y. MRQ sales/assets at 0.573 vs. 0.56 y/y. MRQ assets/equity at 2.858 vs. 2.862 y/y.

3. American Water Works Company, Inc. (NYSE:AWK): Provides water and wastewater services to residential, commercial, industrial, public, and other customers in the United States and Canada. Market cap at $5.97B, most recent closing price at $33.87. Average intra-day volatility over the last month at 1.39%. The stock is currently trading 0.49% above its 20-day moving average, 0.84% above its 50-day MA, and 7.54% above its 200-day MA. MRQ net profit margin at 6.75% vs. 4.4% y/y. MRQ sales/assets at 0.044 vs. 0.042 y/y. MRQ assets/equity at 3.311 vs. 3.404 y/y.

4. Costco Wholesale Corporation (NASDAQ:COST): Operates membership warehouses that offer a selection of branded and private label products in a range of merchandise categories in no-frills, self-service warehouse facilities. Market cap at $37.56B, most recent closing price at $86.56. Average intra-day volatility over the last month at 1.43%. The stock is currently trading 3.10% above its 20-day moving average, 0.50% above its 50-day MA, and 3.77% above its 200-day MA. MRQ net profit margin at 1.73% vs. 1.57% y/y. MRQ sales/assets at 0.802 vs. 0.765 y/y. MRQ assets/equity at 2.212 vs. 2.255 y/y.

5. American States Water Company (NYSE:AWR): Provides water, electric, and contracted services in the United States. Market cap at $692.16M, most recent closing price at $36.70. Average intra-day volatility over the last month at 1.62%. The stock is currently trading 0.89% above its 20-day moving average, 2.45% above its 50-day MA, and 5.27% above its 200-day MA. MRQ net profit margin at 9.49% vs. 8.05% y/y. MRQ sales/assets at 0.086 vs. 0.078 y/y. MRQ assets/equity at 3.004 vs. 3.162 y/y.

6. Apollo Commercial Real Estate Finance, Inc. (NYSE:ARI): Operates as a commercial real estate finance company in the United States. Market cap at $328.71M, most recent closing price at $15.98. Average intra-day volatility over the last month at 1.70%. The stock is currently trading 0.65% above its 20-day moving average, 1.53% above its 50-day MA, and 14.11% above its 200-day MA. MRQ net profit margin at 62.99% vs. 47.35% y/y. MRQ sales/assets at 0.02 vs. 0.012 y/y. MRQ assets/equity at 2.084 vs. 3.065 y/y.

7. TW Telecom Inc. (NASDAQ:TWTC): Provides managed network services to enterprise organizations and communication services companies in the United States. Market cap at $3.41B, most recent closing price at $22.68. Average intra-day volatility over the last month at 1.93%. The stock is currently trading 1.92% above its 20-day moving average, 4.30% above its 50-day MA, and 16.64% above its 200-day MA. MRQ net profit margin at 5.39% vs. 3.8% y/y. MRQ sales/assets at 0.133 vs. 0.125 y/y. MRQ assets/equity at 2.651 vs. 2.725 y/y.

8. Interline Brands Inc. (NYSE:IBI): Operates as a direct marketer and distributor of maintenance, repair, and operations products in the United States, Canada, and Central America. Market cap at $799.69M, most recent closing price at $25.10. Average intra-day volatility over the last month at 1.99%. The stock is currently trading 25.34% above its 20-day moving average, 21.42% above its 50-day MA, and 46.04% above its 200-day MA. MRQ net profit margin at 2.38% vs. 2.31% y/y. MRQ sales/assets at 0.303 vs. 0.297 y/y. MRQ assets/equity at 1.975 vs. 1.986 y/y.

*Accounting data sourced from Google Finance, all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.