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One Thing To Remember About The Advance NanoTek Limited (ASX:ANO) Share Price

If you own shares in Advance NanoTek Limited (ASX:ANO) then it’s worth thinking about how it contributes to the volatility of your portfolio, overall. In finance, Beta is a measure of volatility. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the 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 are more sensitive to general market forces than others. 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.

Check out our latest analysis for Advance NanoTek

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What ANO’s beta value tells investors

Given that it has a beta of 0.89, we can surmise that the Advance NanoTek share price has not been strongly impacted by broader market volatility (over the last 5 years). This suggests that including it in your portfolio will reduce volatility arising from broader market movements, assuming your portfolio’s weighted average beta is higher than 0.89. Beta is worth considering, but it’s also important to consider whether Advance NanoTek is growing earnings and revenue. You can take a look for yourself, below.

ASX:ANO Income Statement Export January 15th 19
ASX:ANO Income Statement Export January 15th 19

How does ANO’s size impact its beta?

Advance NanoTek is a noticeably small company, with a market capitalisation of AU$52m. Most companies this size are not always actively traded. It is not unusual for very small companies to have a low beta value, especially if only low volumes of shares are traded. Even when they are traded more actively, the share price is often more susceptible to company specific developments than overall market volatility.

What this means for you:

Since Advance NanoTek is not heavily influenced by market moves, its share price is probably far more dependend on company specific developments. It could pay to take a closer look at metrics such as revenue growth, earnings growth, and debt. This article aims to educate investors about beta values, but it’s well worth looking at important company-specific fundamentals such as Advance NanoTek’s financial health and performance track record. I highly recommend you dive deeper by considering the following:

  1. Future Outlook: What are well-informed industry analysts predicting for ANO’s future growth? Take a look at our free research report of analyst consensus for ANO’s outlook.

  2. Past Track Record: Has ANO 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 ANO’s historicals for more clarity.

  3. Other Interesting Stocks: It’s worth checking to see how ANO measures up against other companies on valuation. You could start with this free list of prospective options.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.