Limited Product Line. This is not always a problem, but if a particular product is in transition from being proprietary to becoming a commodity, or if the market for it is particularly transient, or if its patent is about to expire, then the producer must take steps to either diversify its offerings or protect market share. Many profitable, otherwise healthy, companies have been significantly effected overnight by lawsuits and legislation. Volatility of the Industry. Certain industries only prosper under certain conditions.
Home building is much stronger during times of general economic prosperity.
Suppliers of home building materials are thus more cyclical than the general economy. There are no set rules as to how much a particular perceived risk is worth in terms of additional return. Pricing additional risk to companies which appear more speculative than the median return for micro-caps would suggest is important, but difficult. One important message to glean from Figure 2 is that maximizing shareholder value can often be achieved by minimizing shareholder risk. It is purely a matter of informed judgment.