Mercifully, the extreme volatility of the fourth quarter of 2018 has all but faded. That doesn’t mean it can’t come back, but right now most stocks are acting well. But not all of them, of course. There are still plenty of volatile stocks out there – and the most volatile stocks today are ones you should definitely avoid.
I originally compiled this list of the most volatile stocks in late 2017, when the VIX was at record lows and stocks at all-time highs. Interestingly, the list didn’t change much when the market became more unpredictable last year, which shouldn’t be much of a surprise. Stocks that are volatile in calm waters are sure to become even more volatile when things get choppy.
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.
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Reflecting the more docile investing climate, only a few came across my radar in this search, so these stocks are truly outliers—wild and unpredictable despite the CBOE Volatility Index (VIX) being at five-month lows. Until they settle into some sort of predictable pattern, I’d steer clear of these up-and-down stocks.
So, without further ado, here are the three most volatile stocks today.
Volatile Stock #1: Nvidia (NVDA)
Not long ago, this was one of the hottest stocks on the market. Shares of Nvidia, which makes chips for the mobile, gaming and automotive markets, exploded from 2016 through the first nine months of 2018, zooming from 32 to a high of 289 in early October. But my how things have changed: it’s down 45% from that peak, trades well below its 200-day moving average, and has a beta of 2.28. Though NVDA has stabilized of late, the six-month chart paints an ugly picture.
A month from now, perhaps NVDA will be buyable again. A break above three-month resistance at 170 could portend a longer recovery. Until then, I wouldn’t buy low on this one just yet.
Volatile Stock #2: Devon Energy (DVN)
Few sectors have been hit harder than energy stocks these last couple years. On the one hand, that means there are a lot of bargains in the energy space – indeed, our Crista Huff currently recommends several energy stocks in her Cabot Undervalued Stocks Advisor portfolio. But Devon Energy isn’t one of them. It’s down 31% in the last six months, and there’s no real reason to believe a major bounce-back is in the offing; analysts expect declines in both the top and bottom lines for Devon Energy this year. Throw in a beta of 2.54, and a chart that looks like this, and I wouldn’t touch it…
Volatile Stock #3: Freeport-McMoran (FCX)
We’re generally not big on mining companies here at Cabot, and Freeport-McMoran is no exception. The reasons are simple: miners are too dependent on the prices of the precious metals they mine, making them unpredictable. Though gold prices have been trending in the right direction in recent months, the price of copper—which Freeport-McMoran mines heavily—remains well below its 2018 highs. It’s no coincidence that FCX stock is down too, tumbling 30% in the last year and is still chopping around wildly despite some strong net gains year to date.
If FCX topples its 200-day moving average, it might have momentum that’s more trustworthy. But there have been far too many ups and downs to believe that will happen.
Bottom Line on the Most Volatile Stocks Today
As NVDA in particular reveals, there’s a thin line between being a good growth stock and a stock that’s too volatile to trust. Five months ago, NVDA was one of the best performing stocks on the market, and was a regular recommendation in our Cabot Top Ten Trader momentum-stock advisory, appearing three times in 2017 and once in the second half of 2018. Since then, it’s been a bumpy ride. In a market that has done an amazing job getting back up off the late-2018 mat, it’s simply not worth having volatile, unpredictable stocks in your portfolio.
A few months (or perhaps even weeks) 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.