Volatile Stocks Can Be Exhausting to Have in Your Portfolio. And That’s Why You Should Avoid These Three.
Four months ago, it would have been nearly impossible to limit the list of the market’s most volatile stocks to three. That’s when most of America closed down, the economy was being shuttered, and the S&P 500 was in the throes of one of its quickest market crashes in history.
Today, though coronavirus hasn’t gone away (in fact, it’s worsened), the stock market is in a far better place. Since the March 23 bottom, stocks have rallied with surprising force, recovering most of their February and March losses to trade within 6.8% of their pre-virus crash all-time highs as of this writing. Who knows how long the rally can last, considering we still have 11.1% unemployment and states from Florida to Texas to California are closing parts of their economy again. But for now, the market is mostly healthy, and there are too many good stocks out there to risk taking on a volatile stock. It’s not worth the risk.
So which stocks should you avoid at all costs as we enter the second half of a very uncertain year?
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 – two things you can easily steer clear of in this relatively calm environment. 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: Schlumberger (SLB)
It’s no surprise that an energy stock tops the list. One of the world’s leading oilfield services providers, Schlumberger has felt the burn of lower oil prices, with sales slipping 5.4% in the first quarter (second-quarter earnings are due out later this month) and analysts anticipating a nearly 30% sales decline for full-year 2020. Meanwhile, the stock is down a whopping 56% this year, with much of the slide coming before coronavirus laid waste to U.S. markets in late February and March.
With a beta north of 2 (2.12) and the stock recovering some, but not enough to top its 50- or 200-day moving averages, since its March lows, SLB isn’t worth trying to buy low on. The chart paints a pretty clear picture:
Volatile Stock #2: Marathon Petroleum (MPC)
A spin-off of Marathon Oil (MRO), Marathon Petroleum – a petroleum refining, marketing and transportation company headquartered in Findlay, Ohio – saw its sales decline more than 10% in the first quarter. But the worst is yet to come: analysts expect a 43% revenue decline and deep profit losses (-$1.60 per share) in the second quarter, and a 29% sales decline for the year (with -$2.54 in EPS losses). Even the company’s 6.5% dividend yield hasn’t been enough to make up for the 41% decline in the share price so far this year, and a beta of 2.23 shows that MPC is still too volatile even though the stock has more than doubled since its mid-March bottom.
Volatile Stock #3: SVB Financial Group (SIVB)
As I wrote yesterday in this space, bank stocks have been underperforming the market for years – and this regional bank stock is no different. SVB is short for Silicon Valley Bank; but despite its glitzy Santa Clara location, this regional bank has had a rough year. Sales are expected to decline more than 7% this year, while earnings per share are likely to be sliced in half from 2019. With no dividend, a beta of 2.24 and a 16% decrease in the share price this year, SIVB isn’t worth the gamble right now, even after a big run-up the last few months.
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.