Stocks have had a rough start to 2022. Volatility has returned with a vengeance, as the VIX has spent most of the last three months above 20, and sometimes above 30, while most growth stocks are have traded below their 200-day moving averages. With that kind of volatility plaguing the market, 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 even this already topsy-turvy 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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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: Penn National Gaming (PENN)
Casinos have mostly reopened after a long Covid-19 hiatus, and business for this Pennsylvania-based casino and racetrack operator has returned to pre-pandemic levels and then some. But not enough to impress Wall Street. Penn National’s sales grew 65% in 2021 after cratering (-32.5%) in 2020, and earnings per share ($2.64) hit a four-year high. But that growth is expected to stagnate this year, and as a result, PENN shares are down 22% year to date and sporting a beta of 2.39. No thanks.
Volatile Stock #2: Block, Inc. (SQ)
Not long ago, this was one of our favorite stocks; our Tim Lutts tabbed the formerly named Square as one of his forever stocks. But ever since the financial services and digital payments company changed its name to Block, Inc. in early December, the stock has plummeted; it’s down 21% so far this year. Part of the problem is slowing growth after a big 2021; sales and earnings are supposed to increase by single digits this year.
But like many fast-rising tech stocks during the pandemic, SQ stock had simply gotten out too far over its skis. From March 2020 to February 2021, the stock rocketed from 38 per share to 276. It was still in the 260s in late October when the bottom started to fall out, and the growth stock sell-off that’s taken place since late November only accelerated the downward spiral.
I’m sure SQ will be back – we named it one of our top forever stocks for a reason, and it’s been showing signs of life in the last few weeks. But the intermediate-term trend is down, and the 2.31 beta indicates how volatile it’s been.
Volatile Stock #3: The Trade Desk (TTD)
Another recent Cabot favorite on the heels of a strong 2021, shares of this data-driven digital advertising giant have gone in the tank the last few months, and are down more than 26% already in 2022. Even after the big drop-off, TTD shares trade at more than 84 times forward earnings. Sprinkle in a beta of 2.13, and I’d steer clear of this one at the moment.
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.
Do you own any volatile stocks in your portfolio that used to be strong performers? How are you approaching them now?
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.