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Tickers in this Article: AA, CAT, TRV, KO, CSCO, MMM, SPY
Stress tests are a great way to test the stability of a financial institution or any given company. While the merit of the government's recent stress tests of U.S. banks are up for debate, when it comes to investing in individual stocks, down days on the market provide a window into their ability to stand strong or crumble.

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By using the example of the Dow Jones Industrial Average on July 2, which was down 223 points or 2.63%, we hope to get a better look at a few of the most resilient stocks trading on the Dow Jones Industrial Average (DJIA).

The Fallen
The drop in the stock prices suggests additional levels of volatility in response to fluctuations in the overall market. The downward movement is not necessarily an indication of a trend, but rather a signal to potential investors to dig deeper into the details. Two key statistics investors will want to keep track of are a stock's beta, a measure of volatility, and the stock's price/book (P/B) ratio.

Let's take a look at how these statistics play out with these three stocks.


Symbol
Stock
Closing Price 07/02/09
% Change
Beta
Price/Book
NYSE:AA
ALCOA INC
$9.86
0.49 (4.73%)
2.14
0.81
NYSE:CAT
CATERPILLAR INC
$31.74
1.45 (4.37%)
1.61
3.20
NYSE:TRV
THE TRAVELERS CO
$39.20
1.93 (4.69%)
0.61
0.91



Alcoa has the highest beta of the group of stocks mentioned. The company has fallen the most among the group listed over the past year, declining nearly 70% while the S&P 500 has fallen over 29% for the same 52-week timeframe ending July 2.

Statistics Review
A beta of 1 suggests a stock will move up and down along with the performance of a broad market indicator like the S&P 500, tracked by the SPDRS S&P 500 Index (NYSE:SPY). A 5% uptick in the S&P could translate to a 5% upswing for a stock with a beta of 1. A beta below 1 suggests less correlation to the movements of the broad index.

A P/B ratio of 1 suggests that a stock is trading for its breakup value if the company was broken apart and sold. A P/B below 1 can be an indication of a stock trading below its breakup value, which is a signal investors can use to do more research towards determining if the stocks long-term prospects make it a good buy.

Here's a look at those same statistics for some of the most resilient stocks trading on the Dow these days.


Symbol
Stock
Closing Price 07/02/09
% Change
Beta
Price/Book
NYSE:KO
COCA-COLA CO.
$48.88
0.30 (0.61%)
0.61
5.49
NYSE:MMM
3M COMPANY
$60.25
0.49 (0.81%)
0.70
4.33
Nasdaq:CSCO
CISCO SYSTEMS
$18.50
0.30 (1.60%)
1.18
2.89



The Resilient
Coca-Cola proved to be the most resilient stock on the DJIA, falling less than 1% while the DJIA was down 2.63%. Coca-Cola's low beta has also translated into its stock price falling just over 5% over the past year ending July 2. 3M Company also fell less than 1% on July 2 while its stock price has fallen just over 13% over the past year.

The Bottom Line
A stocks beta and its P/B ratio, while helpful, are not sufficient indicators by themselves towards determining a stock's future growth potential. Rather investors should take a vantage point encompassing past performance and future growth prospects, especially during periods of market dislocation. (For further reading, see Value By The Book and Choose Your Own Asset Allocation Adventure.)

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