Analysts Flag Low-Volatility Stocks Mohawk Industries, Scorpio Tankers, and Assured Guaranty for Potential Underperformance
## Executive Summary
An analysis of low-volatility equities has identified **Mohawk Industries (MHK)**, **Scorpio Tankers (STNG)**, and **Assured Guaranty (AGO)** as stocks that investors should approach with caution. The core of the argument rests on the principle that while appealing for their stability, low-volatility stocks can significantly underperform during bull market cycles, potentially trapping capital in assets that fail to capture market-wide gains. This challenges the common perception of these stocks as universally safe investments and underscores the need for a more nuanced, cycle-aware investment strategy.
## The Low-Volatility Dilemma
Low-volatility investing is a strategy designed to offer portfolio stability and mitigate risk. However, this defensive posture comes with an inherent trade-off. Historical data demonstrates a clear pattern of underperformance during periods of strong market growth. For instance, between 2019 and 2020, the **S&P 500 Low Volatility Index** lagged the broader **S&P 500** by a cumulative total of more than 30%. This performance gap illustrates the opportunity cost of favoring stability over growth in a rising market, suggesting that low-volatility is not a "buy and hold" strategy but a factor whose effectiveness is dependent on the prevailing market regime.
## In-Depth Stock Analysis
The caution extends to specific companies, with **Mohawk Industries (MHK)** serving as a prime example. The flooring manufacturer's stock, trading at $114.37 with a forward P/E ratio of 11x, exhibits a significant fundamental weakness: its earnings per share (EPS) have contracted by an annual average of 37.6% over the last two years. As stock prices generally follow long-term EPS trends, this sustained earnings decline presents a major headwind for future returns. The stock's rolling one-year beta is 0.91, confirming its lower volatility relative to the market.
While detailed financial metrics were not provided for **Scorpio Tankers (STNG)**, which operates a modern fleet of product tankers, or the financial guaranty insurer **Assured Guaranty (AGO)**, they are included in the same cohort of low-volatility assets flagged for potential underperformance in the current market environment.
## Market Implications and Strategy
The primary implication of this analysis is that factor performance is cyclical. The periods when low-volatility stocks underperform often coincide with periods when high-beta stocks significantly outperform the S&P 500. This dynamic suggests that a more effective approach may involve a strategic rotation between low-volatility and high-beta indexes based on risk-adjusted relative strength.
This stands in stark contrast to high-growth stories that have delivered market-beating returns. For example, curated lists of high-quality growth stocks have produced exceptional results, with names like **Nvidia (NVDA)** generating a 1,326% return between June 2020 and June 2025, and **Tecnoglass (TGLS)** achieving a 1,754% five-year return. These examples highlight the significant upside potential that a purely low-volatility strategy may forgo.
## Broader Context
This analysis serves as a critical reminder that no single investment factor is optimal for all market conditions. The classic debate between growth and value extends to the factors of high-beta versus low-volatility. While low-volatility stocks have a role in capital preservation and risk management, investors must remain aware of the broader market cycle. In environments favoring growth and risk assets, a portfolio overly concentrated in low-volatility names risks significant underperformance, and a more dynamic, rotational strategy may be warranted to navigate shifting market leadership.
