Volatile Stocks Can Be Exhausting to Have in Your Portfolio. And That’s Why You Should Avoid These Three.
Things are relatively calm on Wall Street right now, with the S&P and Dow Jones Industrial Average near fresh all-time highs and the Nasdaq bouncing back from another rough February and March. The CBOE Volatility Index (VIX) is at its lowest level in more than a year, meaning most of the panic surrounding the slow pandemic recovery, rising interest rates and potentially escalating inflation has vanished. With volatility at a low, there’s no point in having any volatile stocks in 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 2.0 on the nose, and a share price that peaked in late January, and is down more than 22% 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 11% year to date, and the beat is quite high at 2.1. Sprinkle in the fact that the stock is flirting with its 200-day moving average now, 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 15% in 2021 and with a beta of 2.5. It appears to have bottomed about a week ago, and the worst may be over for TTD. But it’s still dangerously close to its 200-day line, and earnings per share are expected to decline sharply this year. I’d steer clear for 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.