In august of 2014, I wrote a post about the beta coefficient.
It wasn't a masterpiece of litterature, but, I have to say that, after 4 years, I've never ceased to think that a low beta was something important. Of course, in a portfolio of 20 or 30 stocks, we should pick some stocks with a beta over 1 because some very great stocks have a higher beta coefficient. But I believe that, in a global portfolio perspective, we should target an average beta under 1.
Because most of the great stocks have a low beta. So, if your portfolio has a low beta, there's more chances that your stocks are good. The greatest stocks are highly predictable and are protected against a market correction. Well, they're not immuned to a market correction, but they resist better, because they continue to perform in a recession, which is not the case for all stocks. And we ask less questions about our picks when our stocks are less volatile. Some experts will deny this, but in my view, they're full of shit. Nobody likes to see their stocks drop 20% without any reason.
When I think about the canadian market, all the great stocks (or so) have a low or very low beta. For instance:
Alimentation Couche-Tard: -0,85
Boyd Group: 0,13
Enghouse Systems: 0,22
Lassonde Industries: 0,24
Constellation Software: 0,28
Open Text: 0,4
CCL Industries: 0,66
MTY Food Group: 0,7
Is it really a coincidence that this selection of 12 of the best canadian stocks includes only stocks with a beta under 0,75?