By Ian Salisbury

The stock market has been on a wild ride in 2025, giving stocks that tend to sit out bouts of volatility a chance to shine.

Near midday on Tuesday, the S&P 500 was down about 1.3% in 2025. But that relatively small loss hides a drop of nearly 19% between the market's record high on Feb. 19 and April 8, when fears over President Donald Trump's trade wars reached their height.

That turbulence has given low-volatility stocks a leg up, according to the fund researcher Morningstar, which tracks a family of indexes that group stocks by half a dozen "factors" with investment potential, including low volatility, value, momentum, and more. The outperformance represents a turnaround from 2023 and 2024, when the stock market was marching steadily upward, leaving staid, low-volatility shares behind.

Just how well has the factor done in 2025? The iShares Edge MSCI Min Vol USA exchange-traded fund has returned 4.1%, beating the broad market by more than five percentage points. The ETF has gained 10.9% on average over the past three years, compared with 14.3% for the S&P 500, according to Morningstar.

Still, that shouldn't necessarily faze low-vol fans. "This is a factor that's not necessarily about producing superior returns to the overall market, it's about beating the market on a risk-adjusted basis," Morningstar analyst Dan Lefkovitz said in a post Friday.

Among the low-volatity stocks that have driven the factor's standout returns are Berkshire Hathaway, Coca-Cola, Mastercard, and Marsh & McLennan, Lefkovitz wrote.

Berkshire's Class A shares are up more than 12% so far this year, despite dropping nearly 5% earlier this month on news CEO Warren Buffett aimed to finally retire at the age of 94. Buffett is famed for his ability to sidestep market losses, and Berkshire's 2025 performance was no doubt helped by its $335 billion cash holdings.

Coca-Cola, which happens to be a top Berkshire holding, is up nearly 16% in 2025. Dismal consumer sentiment has tilted the market playing field in favor of companies selling goods people will keep buying regardless of the economic climate.

Last month, Coke posted better-than-expected first-quarter earnings. While the company derives about 60% of its revenue internationally, its global bottling operations mean much of its business wouldn't be directly affected by tariffs. While it could face higher aluminum costs for cans, executives called the situation "manageable," in the company's latest outlook.

As the low-volatility factor has thrived in 2025, so-called quality stocks have struggled. At first glance, the two factors might seem to have a lot in common, both meaning something akin to "blue-chip."

But as Morningstar notes, the quality factor tends to emphasize companies with the highest profit margins and strongest balance sheets. In today's world, that means big helpings of tech stocks like Nvidia, down 2% this year, and Alphabet, off 9%.

Overall, the iShares Edge MSCI USA Quality Factor ETF has delivered a negative total return of 1% in 2025.

Write to Ian Salisbury at ian.salisbury@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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May 27, 2025 12:28 ET (16:28 GMT)

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