In this article, we will look at the 10 Most Volatile Stocks To Buy Right Now.
Impact of Geopolitics on Investor Psyche and Investment Planning
In an interview on Bloomberg on October 2, Jimmy Chang, CIO at Rockefeller Global Family Office, shared his insights on how geopolitical events, such as the recent conflict between Iran and Israel, affect the investor psyche and investment planning. Chang emphasized the importance of separating noise from signals, noting that markets have been conditioned to react temporarily to such events, only to return to normal once the situation is controlled. He predicted that the market would likely move past the current conflict unless there is further escalation.
Chang also discussed the cumulative effect of various conflicts and geopolitical disruptions, including the Ukraine-Russia war and the changing of the guard in terms of presidential elections. He noted that the US election is a bigger catalyst in the near term, with a potential Trump victory being more disruptive to foreign policies, particularly regarding the war in Ukraine and support for Israel. Chang also highlighted the impact of the US market’s inward focus, with investors tending to dismiss overseas events, despite the potential for emerging markets to outperform.
Regarding the US election, Chang noted that his clients are interested in the outcome but have a long-term view, which has not altered their strategic allocation. However, tactically, they may play out different scenarios, such as a blue sweep, which could be viewed as negative for equities and positive for bonds, or a Trump victory, which could be more inflationary and positive for equities. Chang also discussed the potential for tailwinds, such as interest rates coming down and an economy doing better than expected, to outweigh any potential negatives from the election.
Chang expressed concerns about other risks, such as the port and Boeing strikes, which could have significant economic consequences if they drag on. He noted that these events could disrupt the market’s complacency about the interest rate-cutting cycle and potentially lead to inflation coming back. Despite these risks, Chang does not believe that the latest headlines are enough to derail the bull market, predicting a potential 5% pullback before the focus shifts to earnings season and the elections.
Overall, Chang’s comments provide insight into how investors navigate the complex geopolitical landscape and the potential impact of the US election on markets. While there are risks and uncertainties, investors are optimistic about the market’s ability to move past these events and continue expansion. With that in context, let’s take a look at the 10 most volatile stocks to buy right now.
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Our Methodology
To compile our list of the 10 most volatile stocks to buy right now, we used the Finviz and Yahoo stock screeners to find the largest companies with a beta of more than 2. We then narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Most Volatile Stocks To Buy Right Now
10. WESCO International (NYSE:WCC)
Number of Hedge Fund Investors: 51
Beta: 2.03
WESCO International (NYSE:WCC) is a leading distributor of electrical, industrial, and communications maintenance, repair, and operations products. The company serves a diverse range of industries, including construction, utility, and telecommunications.
WESCO International (NYSE:WCC) has seen a slowdown in growth in recent quarters, but its revenues are expected to return to growth in the coming quarters due to easing comparisons and stable demand trends. The company’s revenue growth outlook is positive, driven by electrification, broadband expansion, infrastructure build, and data center demand in the long term.
In Q2, WESCO International’s (NYSE:WCC) sales declined 4.6% year over year to $5.5 billion, with sales declining in two segments. However, the company’s Communications and Security Solutions (CSS) segment saw a rise of 0.8%. The company’s margins improved by 20 basis points to 21.9% in Q2, compared to 21.6% in the previous quarter and adjusted EBITDA margin improved 90 basis points to 7.3%. Management has guided for between 7.0% and 7.3% adjusted EBITDA margin for the full year.
WESCO International’s (NYSE:WCC) revenue growth outlook is positive, driven by electrification, broadband expansion, infrastructure build, and data centre demand, and its margins are expected to sequentially improve in the coming quarters. Industry analysts have reached a consensus on stock’s Buy rating, with an average target price of $195.81 that suggests a 17.34% upside potential from its current levels. 51 hedge funds have a combined stake of $1.79 billion in the company as of the second quarter.
9. Devon Energy (NYSE:DVN)
Number of Hedge Fund Investors: 52
Beta: 2.06
Devon Energy (NYSE:DVN) is an independent oil and natural gas exploration and production company based in the United States. The company operates primarily in North America and focuses on high-quality resources, including the Delaware Basin.
On September 27, Devon Energy (NYSE:DVN) completed the acquisition of Grayson Mill, a strategic acquisition in the Williston Basin. The company’s acquisition of Grayson Mill adds 307,000 net acres to its portfolio and is expected to add 100,000 barrels of oil equivalent per day (BOE/D) to its production in FY 2025. The deal is expected to be accretive to earnings and is set to close by the end of the third quarter.
Devon Energy (NYSE:DVN) production guidance for FY 2024 has been revised upward, with total oil production expected to reach 324,000 BOE/D, showing a 3% increase compared to the previous outlook. Total production, including NGL and natural gas, is expected to hit 677-688 MBOE/D, showing 5% growth compared to the earlier projection.
In Q2, Devon Energy reported a revenue of $3.9 billion, up 8.9% compared to the previous quarter. Net income of $844 million, and EPS of $1.41. The company has also increased its stock buyback authorization to $5 billion, by 67%, making it a more attractive capital return play. Devon Energy (NYSE:DVN) has consistently bought back its shares in the market and has achieved a total shareholder distribution of $532 million in the second quarter.
Devon Energy (NYSE:DVN) strategic acquisition, increased stock buyback authorization, and attractive valuation make it a compelling investment opportunity in the energy sector.
8. Carnival Corporation (NYSE:CCL)
Number of Hedge Fund Investors: 53
Beta: 2.70
Carnival Corporation (NYSE:CCL) is a global leader in leisure travel and cruise line operations and offers a wide range of cruise experiences across its brands. The company is dedicated to providing unique travel opportunities while focusing on sustainability initiatives to reduce its carbon footprint.
In Q3, Carnival Corporation’s (NYSE:CCL) revenue reached an all-time high of $7.9 billion. The company’s gross margin yields increased by 19% year-over-year, and net yields exceeded 2023 levels by 8.7%. Ticket prices and onboard spending were both up mid-single digits. Carnival Corporation’s (NYSE:CCL) adjusted EBITDA for the quarter was $2.82 billion, ahead of the consensus estimate of $2.67 billion. The company is poised to deliver record operating performance for the full year 2024, with adjusted EBITDA now expected to cross $6 billion and adjusted return on invested capital to be approximately 10.5%.
The company’s management has attributed the strong performance to strong demand, which has enabled them to increase their full-year yield guidance for the third time this year on favourable cost guidance. Booking volume for 2025 sailings has been strong at higher prices compared to the prior year, with the cumulative advanced booked position for the full year 2025 above the previous 2024 record.
Carnival Corporation’s (NYSE:CCL) bookings update indicates that nearly half of 2025 has been booked, with prices ahead of last year. The company’s brands are delivering robust booking momentum, with all brands ahead on price for 2025 sailings.
Carnival Corporation’s (NYSE:CCL) strong Q3 results and positive bookings update suggest that the company is well-positioned for continued growth and success in the cruise industry.
7. Caesars Entertainment (NASDAQ:CZR)
Number of Hedge Fund Investors: 54
Beta: 2.96
Caesars Entertainment (NASDAQ:CZR) is a gaming and hospitality company that operates a portfolio of casinos and resorts across the United States and internationally.
Caesars Entertainment (NASDAQ:CZR) is focusing on high-margin products, such as parlays, which have been on the rise. Parlays are a hit because they boost profits and help sportsbooks cover other costs. However, the company faces challenges in the digital sports betting space, with volumes flat and a new progressive tax on sports betting revenues in Illinois, which could cost the company around $5 million a year.
Caesars Entertainment’s (NASDAQ:CZR) Nobu Hotel Caesars in New Orleans is expected to open in the coming months, and gaming revenue is projected to rise by $80 million. A new property in Virginia is also expected to open in late 2024. Las Vegas faced headwinds, including higher union contract costs and delays in bringing some restaurants up to speed.
Caesars Entertainment (NASDAQ:CZR) is making progress in reducing its debt burden, with over $100 million paid off in Q2. The debt load of around $12.162 billion is still a significant challenge, but the company is working to reduce it further.
6. Shopify (NASDAQ:SHOP)
Number of Hedge Fund Investors: 56
Beta: 2.36
Shopify (NASDAQ:SHOP) is a leading e-commerce platform that enables businesses to set up and manage online stores with a user-friendly interface and a suite of powerful tools. The company empowers entrepreneurs to build their brands and sell products effectively.
One of the key drivers of Shopify’s (NASDAQ:SHOP) growth is its lending program, Shopify Capital, which has already extended $5.1 billion in credit to merchants. This program is potentially disrupting traditional banks and venture funds by offering loans to merchant revenue, which allows the company to tap into a large and growing market of providing loans to small and medium-sized businesses that are often underserved by traditional banks.
Shopify (NASDAQ:SHOP) loans have an APR range between 32% and 45%. This high-yielding loan portfolio provides the company with a significant source of revenue and profit, which can be used to fuel further growth and expansion. By packaging the loans into securities and selling them to investors, Shopify (NASDAQ:SHOP) can also free up capital to invest in other areas of the business.
Alternatively, Shopify (NASDAQ:SHOP) can hold the loans for returns on idle capital. With APRs ranging between 32% and 45%, Shopify (NASDAQ:SHOP) can generate significant returns on its investment, which can be used to fuel further growth and expansion.
Shopify’s (NASDAQ:SHOP) unique business model, combined with its highly profitable lending program, makes it an attractive investment opportunity for those looking for growth and income.
5. Block (NYSE:SQ)
Number of Hedge Fund Investors: 59
Beta: 2.49
Block (NYSE:SQ), formerly known as Square, is a financial services and mobile payments company known for its Square and Cash App, which enables businesses and individuals to send and receive payments. The company also owns TIDAL which helps artists to become entrepreneurs and connect with fans.
In Q2, Block (NYSE:SQ) reported that its net revenue increased 11% to $6.16 billion compared to the same quarter in the previous year. The revenue growth was driven by strong momentum across the Cash App ecosystem, which contributed $4.13 billion to net revenues in the reported quarter, up 12% year over year due to the company’s buy now, pay later (BNPL) program. The company also witnessed solid traction across the Square ecosystem, generating $1.98 billion in revenues, up 9% year over year.
For Q3, Block (NYSE:SQ) expects gross profit to reach $2.22 billion, representing a 17% year-over-year increase. Adjusted EBITDA is forecasted to be $695 million, while adjusted operating income is expected to be $320 million. Looking ahead to the full year 2024, Block (NYSE:SQ) has raised its guidance for gross profit to $8.89 billion, indicating an 18% increase from 2023. The company has also increased its guidance for adjusted EBITDA to $2.90 billion and operating income to $1.44 billion, up from $2.76 billion and $1.30 billion, respectively.
Block’s (NYSE:SQ) management has made significant progress in reducing fixed costs as a share of revenue, within product development, sales & marketing, and general & administrative. 59 hedge funds own shares of the company as of the second quarter, with a combined value of $2.68 billion.
4. Builders FirstSource (NYSE:BLDR)
Number of Hedge Fund Investors: 59
Beta: 2.06
Builders FirstSource (NYSE:BLDR) is one of the largest suppliers of building materials, prefabricated components, and value-added services in the US for residential and commercial construction.
Despite its long-term growth potential, the company faces challenges due to a slowdown in single-family housing starts and affordability issues. In Q2, Builders FirstSource’s (NYSE:BLDR) net sales decreased 1.6% year-over-year to approximately $4.5 billion. The decline was driven by a downward trend in multifamily, which offset growth from single-family, repair and remodel, and acquisition. The company’s adjusted EBITDA margin contracted 2% to 15%, and adjusted net income margin fell 2.5% to 11%. The company’s diluted adjusted EPS fell 22% year-over-year to $14.59.
Over the past three years, BLDR’s net sales have been volatile. In 2022, net sales grew 14.2% to $22.7 billion, driven by acquisition and core organic sales growth. However, in 2023, net sales fell 24.8% year-over-year to $17.1 billion due to a decline in core organic sales and commodity price deflation. The decrease in net sales was also driven by a slowdown in single-family housing starts.
Builders FirstSource (NYSE:BLDR) operates in a highly fragmented market, which provides opportunities for growth and expansion. Builders FirstSource’s (NYSE:BLDR) market share is currently 11% in the single-family end market and 2% in the multifamily end market. The company has already completed five acquisitions in the first two quarters of 2024, which are expected to expand its market presence, market reach, manufacturing capabilities, and service offerings.
According to realtor.com, the US housing gap has been widening, with a cumulative gap of 2.5 million units between 2012 and 2023. This housing gap situation is expected to create long-term opportunity for Builders FirstSource (NYSE:BLDR), as the under-building of houses and consistent growth in household formation combined with low home inventory is expected to create demand for more homes to be built.
3. Carvana (NYSE:CVNA)
Number of Hedge Fund Investors: 61
Beta: 3.43
Carvana (NYSE:CVNA) is an innovative online platform that allows customers to buy, sell, and trade used cars. As a digital auto-retailer, Carvana’s (NYSE:CVNA) unique model focuses on customer convenience, transparency, and a hassle-free car-buying experience.
In Q2, Carvana (NYSE:CVNA) reported a gross profit per vehicle of $7,049, a significant improvement from previous quarters. This achievement results from the company’s focus on reducing operational costs, improving its reconditioning processes, and optimizing its vehicle acquisition strategy. The company increased unit sales by 33% year-over-year while reducing operating costs per vehicle by $400 per unit.
Carvana’s (NYSE:CVNA) focus on profitability is starting to pay off, and the company is poised to benefit from economies of scale and digital distribution models that e-commerce. The company’s unique platform allows it to operate nationally, benefiting from immense scale, unique data insights, and minimizing overhead costs, which sets it apart from traditional dealerships that are vulnerable to localized economic conditions.
The company has also revamped its reconditioning processes, which has supported expanding its gross profit margins. Furthermore, management has focused on creating improved processes for acquiring vehicles at auctions, which has supported expanding its gross profit margins. The company’s growth prospects are promising, with analysts projecting revenue to grow from $13.08 billion in 2024 to over $27.5 billion by 2029.
Carvana’s (NYSE:CVNA) growth prospects, combined with its unique platform and improving operations, make it an attractive investment opportunity for those looking to capitalize on the growing demand for online car buying. The company’s stock is owned by 61 hedge funds, with a total value of $5.11 billion as of the second quarter.
2. Tenet Healthcare (NYSE:THC)
Number of Hedge Fund Investors: 64
Beta: 2.14
Tenet Healthcare (NYSE:THC) is a leading healthcare services company operating a network of hospitals and outpatient centers across the United States.
Tenet Healthcare’s (NYSE:THC) deleveraging strategy, which began in 2023, has reduced its net debt from over $14 billion to just over $9 billion, resulting in a leverage ratio that has declined from 4 times to 2.5 times. This reduction in debt has not only improved the company’s financial health but also freed up resources to invest in its core business. The company’s divestment activity has also been successful, with the sale of several underperforming hospitals and assets generating significant proceeds. For example, the sale of its 70% ownership interest in Brookwood Baptist Health in October yielded after-tax proceeds of $790 million, further reducing leverage to just over $9 billion.
In addition to its financial improvements, Tenet Healthcare (NYSE:THC) has also demonstrated strong operating momentum. In the first half of the year, the company reported a 7% increase in sales, with organic growth driven by volume expansion and improved pricing. Adjusted earnings per share have doubled to $5.53, while EBITDA has increased by 10% to $3.9 billion. The company’s guidance for 2024 has also been revised upward, with sales expected to reach $20.8 billion and adjusted EBITDA expected to reach $3.9 billion. These improvements have been driven by the company’s focus on cost control, operational efficiency, and strategic investments in its core business.
Tenet Healthcare (NYSE:THC) has been on a remarkable journey, transforming itself from a highly leveraged healthcare company to a more streamlined and efficient operation.
1. Tesla (NASDAQ:TSLA)
Number of Hedge Fund Investors: 85
Beta: 2.29
Tesla (NASDAQ:TSLA) is a pioneer in electric vehicle (EV) manufacturing and renewable energy. The company is known for its innovative approach to sustainable transportation and designs and produces electric cars, energy storage solutions, and solar products.
Tesla (NASDAQ:TSLA) is poised for a significant catalyst this month as its robotaxi event is scheduled for October 10, followed closely by its Q3 earnings release. This event is expected to shed light on the company’s autonomous vehicle capabilities, particularly its Full Self-Driving (FSD) technology, and provide insight into the market availability of its robotaxi service. While the electric vehicle market is experiencing slowing growth and increasing competition, Tesla’s (NASDAQ:TSLA) high gross margins and potential in the autonomous vehicle space remain a compelling narrative for investors.
According to a report by Fortune Business Insights, the autonomous driving market is expected to grow significantly, with a CAGR of 32% over the next six years, and will reach $39 billion by 2030. As Tesla (NASDAQ:TSLA) transitions into the high-potential market of autonomous vehicles, its shares continue to hold long-term potential and offer investors a promising opportunity for growth. As of the second quarter, 85 hedge funds own shares of the company with a combined value of $4.97 billion.
While we acknowledge the potential of Tesla (NASDAQ:TSLA) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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