Volatile Stocks Can Be Exhausting to Have in Your Portfolio. And That’s Why You Should Avoid These Three.
Volatility is rearing its ugly head again on Wall Street. The CBOE Volatility Index (VIX) spiked to a two-month high on Tuesday, while the Nasdaq suffered its eighth down day in the last 11 trading sessions. Even the seemingly bulletproof Dow Jones Industrial Average was down more than 1% on Tuesday. With volatility returning, it’s important to purge the most volatile stocks from your portfolio.
So which stocks should you avoid at all costs right now?
To screen for the most volatile stocks today, I looked for large-cap stocks with a beta of at least 2—meaning they’re twice as volatile as the market. And I stuck with U.S. companies since, as with small-cap stocks, volatility and unpredictability are more common in emerging market stocks.
Because beta compares the behavior of a given stock with the market itself, these stocks are wild and unpredictable. Until they settle into some sort of predictable pattern, I’d give these up-and-down stocks a wide berth.
So, without further ado, here are the three most volatile stocks today.
Volatile Stock #1: Tesla (TSLA)
Didn’t expect to see this stock here, did you? Well, neither did I when I started my screen. But here Tesla stock is, with a beta of 1.98, and a share price that peaked in late January, and is down 30% since, falling well below its 50-day moving average.
Could this be a prime buying opportunity in one of the market’s great growth stocks? Perhaps. And if you already own TSLA stock, don’t even think about selling any. But if you don’t, I would advise waiting until it pokes its head back above the 50-day line before buying. After a remarkable 18-month run, TSLA was due for a pullback of some kind. It may take another few weeks to play out.
Volatile Stock #2: Advanced Micro Devices (AMD)
Similar to TSLA, AMD was on a tear in 2020 along with most other tech stocks. But the turbulence in traditional growth sectors has knocked shares of this California-based chipmaker back more than 16% year to date, and the beta is quite high at 2.03. Sprinkle in the fact that the stock is now below its 200-day moving average, and I’d give AMD a wide berth until it perks up with any sort of conviction.
Volatile Stock #3: The Trade Desk (TTD)
A former Cabot Wealth favorite, shares of this software company has fallen on hard times of late, with the stock down a whopping 38% in 2021 and with a beta of 2.5. This month the wheels appear to have completely fallen off; TTD shares have lost a third of their value in May alone! I wouldn’t touch this one with an 11-foot pole right now.
Bottom Line on the Most Volatile Stocks Today
A few months from now, a couple of these stocks may have demonstrated enough momentum to be worth the short-term investment. For now, though, they’re among the most volatile stocks today. And that means they’re not worth the risk.
Investment analyst and Chief Analyst of Cabot Wealth Daily, Chris Preston brings you all the latest from the investing world. Sign up to get updates and breaking news delivered FREE to your inbox. Get unlimited access to our library of complimentary investing reports.Sign up now!
*This post has been updated from an original version, published in 2017.