Volatile Stocks Can Be Exhausting to Have in Your Portfolio. And That’s Why You Should Avoid These Three.
It’s not the extreme volatility of the fourth quarter of 2018, but uncertainty has reared its ugly head on Wall Street since the mini-market correction in May, with stocks seemingly at the mercy of the day’s financial or political headlines. And when the headline includes the words “impeachment proceedings” …. well, that’s not exactly a recipe for a stable stock market. It doesn’t mean you should be avoiding stocks – they’re less than 2% off all-time highs, after all. But it does mean that you should avoid the most volatile stocks.
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 hasn’t changed much since the market became more unpredictable late 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.
We’re expecting 30% to 50% gains from virtually each of this week’s Top Ten trades—with the biggest moves coming after next week’s economic reports.
That’s why I’ve made it possible for you to receive all 10 of this week’s trades free.Click here to find out more.
Because beta compares the behavior of a given stock with the market itself, these stocks wild and unpredictable even by current standards. 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: Square (SQ)
Formerly a Cabot Wealth favorite, Square has fallen on hard times of late.
For the year, it’s up, but only 3.7% as of this writing. But after peaking at 82 in late July, it has since plummeted as low as 56 (it currently trades at 57). And it’s been sinking to new lows for more than a month. I still like the story – a mobile payments company that caters to small businesses by turning smartphones or iPads into electronic cash registers – but the company still struggles to turn a profit, and the stock may have gotten a bit overcooked after a huge run-up in 2017 and 2018 (which Cabot Stock of the Week analyst Tim Cook turned into a 195% profit for those who got in early on his February 2017 recommendation).
Here’s what a chart of SQ looks like over the past year:
Not a great trend. Long term, Square stock is likely still a good investment (though not as good as it was when Tim recommended it nearly three years ago). But right now, with a beta north of 3.0 and no established bottom in the chart, SQ is one of the most volatile stocks out there.
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 a whopping 40% in the last year, 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 2.30, 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 29% in the last year and appears on its way down yet again.
That’s a chart that screams: stay away.
Bottom Line on the Most Volatile Stocks Today
As SQ in particular reveals, there’s a thin line between being a good growth stock and a stock that’s too volatile to trust. Exactly, SQ 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 four times in 2017 and twice in 2018. Since then, it’s been a bumpy ride. Despite the recent rockiness, the market that has done a nice job getting back up off the late-2018 mat. And that means 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.