In this article, we will take a look at the top 5 best volatile stocks to buy. For a detailed analysis of these companies, go directly to the 10 Best Volatile Stocks to Buy.
5. Coinbase Global, Inc. (NASDAQ: COIN)
Number of Hedge Fund Holders: N/A
Coinbase Global, Inc. (NASDAQ: COIN) is a Delaware-based company that operates a cryptocurrency exchange platform which facilitates dealings in Bitcoin and Ethereum as well as other big cryptocurrencies. It was founded in 2012 and is ranked fifth on our list of 10 best volatile stocks to buy. Coinbase went public earlier this year and was valued at over $86 billion on the first day of trading, but the share price has dropped since then amid a turbulent few weeks for the crypto industry in general which has seen Bitcoin price plummet too.
On May 14, Coinbase Global, Inc. (NASDAQ: COIN) stock was given an Outperform rating by investment advisory Piper Sandler. Coinbase shares have been soaring after a disappointing few weeks since the IPO after it reported quarterly earnings that just trailed market estimates despite a bearish trend for crypto stocks on the market. In the earnings report, the firm posted $1.6 billion in revenue in the first three months of 2021, missing market estimates of $1.8 billion. The earnings per share were $3.05 for the period against a predicted $3.20.
4. Tesla, Inc. (NASDAQ: TSLA)
Number of Hedge Fund Holders: 68
Tesla, Inc. (NASDAQ: TSLA) is a Palo Alto-based electric vehicle and clean energy firm owned by billionaire Elon Musk. It is placed fourth on our list of 10 best volatile stocks to buy. The firm is one of the biggest on the US stock market with a market cap of more than $568 billion and has returned more than 262% to investors over the past year. However, it is also one of the most volatile stocks on the market with a 52-week price range of $157-$900. Tesla markets battery storage on a massive scale in addition to EV and clean energy products.
On May 14, news agency Reuters reported that Tesla, Inc. (NASDAQ: TSLA) was in talks with Chinese battery firm EVE Energy to supply EV batteries for the production of cars at the Tesla plant in Shanghai amid a huge rise in demand for autos in the post pandemic economy.
At the end of the fourth quarter of 2020, 68 hedge funds in the database of Insider Monkey held stakes worth $12.3 billion in the firm, up from 67 in the preceding quarter worth $8.1 billion.
In its Q1 2021 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Tesla, Inc. (NASDAQ: TSLA) was one of them. Here is what the fund said:
“Tesla, Inc. designs, manufactures, and sells fully electric vehicles, solar products, energy storage solutions, and battery cells. The stock fell during the quarter as a result of general market dynamics and a potential production slowdown due to parts shortages. A refreshed S/X and China Model Y ramp could also have a negative impact on margins in early 2021. We anticipate strong growth and improved margins driven by new production capacity, manufacturing efficiencies, localization of its manufacturing and supply chain, and maturation of Tesla’s full self-driving technology.”
3. Applied Materials, Inc. (NASDAQ: AMAT)
Number of Hedge Fund Holders: 61
Applied Materials, Inc. (NASDAQ: AMAT) is a California-based company that makes and sells semiconductor chips. It was founded in 1967 and is placed third on our list of 10 best volatile stocks to buy. The products made by the firm are used in electronics, flat panel displays for computers, smartphones and televisions, and solar products, among others. Applied stock has returned more than 129% to investors in the past twelve months. The 52-week price range of the stock lies between $52 and $146.
On April 19, investment advisory Citi named Applied Materials, Inc. (NASDAQ: AMAT) as one of the top semiconductor equipment picks on the back of increased demand for the chips that are made using the memory and logic wafer fab equipment marketed by AMAT.
Out of the hedge funds being tracked by Insider Monkey, London-based investment firm Generation Investment Management is a leading shareholder in the firm with 5.2 million shares worth more than $452 million.
2. Pinduoduo Inc. (NASDAQ: PDD)
Number of Hedge Fund Holders: 54
Pinduoduo Inc. (NASDAQ: PDD) is a Cinese technology firm that focuses on agriculture-related products. It was founded in 2015 and is ranked second on our list of 10 best volatile stocks to buy. The company has created an interactive platform that links farmers to distributors and consumers directly. The firm also sells electronic appliances, furniture and household goods, cosmetics and other personal care items through the platform. Pinduoduo stock has returned more than 78% to investors in the past year.
On March 17, Pinduoduo Inc. (NASDAQ: PDD) became the largest online marketplace in China after reporting a 164% year-on-year revenue growth in the fourth quarter of 2020 driven by pandemic sales. Total active users on the platform were 788 million in 2020, up more than 50% compared to the previous year.
At the end of the fourth quarter of 2020, 54 hedge funds in the database of Insider Monkey held stakes worth $10.5 billion in the firm, up from 34 in the preceding quarter worth $4.3 billion.
In its Q1 2021 investor letter, Tao Value, an investment management firm,, highlighted a few stocks and Pinduoduo Inc. (NASDAQ: PDD) was one of them. Here is what the fund said:
“Pinduoduo reported a strong quarter, reporting MAU of 720 million, now surpassing Taobao. However, it was overshadowed by a bigger news on Colin Huang resigning from Board and completely disassociating himself from PDD’s management & operation. Huang explained in his letter to shareholders that he would start fundamental research initiatives in food science. Although not entirely shocked (as he already stepped down from CEO July 2020), I am surprised by the fast pace of such transition. I remain confident in the organization and the culture Huang built but will monitor it closely.”
1. Sea Limited (NYSE: SE)
Number of Hedge Fund Holders: 115
Sea Limited (NYSE: SE) is a Singapore-based internet company founded in 2009. It is placed first on our list of 10 best volatile stocks to buy. The firm has business interests in Asia, Latin America, and North America. It operates in the digital entertainment, e-commerce, and digital financial service domains. Sea stock has returned more than 211% to investors over the past year. The volatility of the stock is indicated by a 52-week price range of $65-$285. The firm posted annual revenue of more than $4.3 billion in 2020.
In February, investment advisory Credit Suisse raised the price target on Sea Limited (NYSE: SE) stock to $285 from $225 on the back of strong growth prospects for the digital entertainment and ecommerce businesses of the Singaporean firm.
Out of the hedge funds being tracked by Insider Monkey, New York-based investment firm Tiger Global Management LLC is a leading shareholder in the firm with 9.2 million shares worth more than $1.8 billion.
In its Q4 2020 investor letter, Hayden Capital mentioned Sea Limited (NYSE: SE). Here is what Hayden Capital has to say about Sea Limited in its letter:
“Sea Ltd (SE): When I wrote our Q4 2019 letter about Shopee launching a Brazilian business, it seemed very few investors or competitors knew or cared.
A year ago, I wrote: “This is the first test for the ecommerce marketplace outside of its Southeast Asia home base. Will the platform’s fun and addicting features overcome a lack of local knowledge and presence? It’s hard to predict consumer behavior and how accepting users will be to a platform – especially one that’s a foreign culture and 10,000 miles away. The only way to know is to experiment and watch the results closely.
Empirically though, it seems that what consumers find entertaining in Asia, generally translates well to Brazil (and Shopee really is as much an entertainment platform, as an ecommerce one).
For example, just look at the top 10 free apps in Brazil. Two are utility messaging apps, so we’ll ignore those (WhatsApp and
Facebook Messenger). But among the remaining eight apps, they’re all entertainment based and overwhelmingly Asian. Four are from China (Kwai, TikTok, VStatus, TikTok Lite), two from Singapore (Free Fire and Shopee, both Sea Ltd apps), and one from the US (Instagram). The commonality is that all these apps are experts at creating addictive habits, as evidenced by their personalized recommendations, avg usage time, number of logins per day per user, etc.” (LINK)I distinctly remember having conversations with several Brazilian hedge funds as recently as last summer who were investors in Sea Ltd. When the topic of Brazil came up, many of them didn’t even know Shopee was operating in their own backyard!
Part of this stems from the fact that Shopee tends to enter markets with a bottoms-up approach. Instead of going after urban, high disposable income users first (of which these hedge fund professionals were certainly part of), they tend to initially go after those with only a few hundred or thousand USD of annual disposable income. These users tend to reside outside of major cities, have fewer choices for recreational pastime (thus turning to gaming, short-form videos, or online shopping for entertainment), can’t afford “branded” items and thus are willing to take a chance on cheaper (but still good quality) un-branded goods, and are willing to wait several weeks for it to be shipped from Asian factories.
Anyone who has studied Pinduoduo (Nasdaq: PDD) in China, will recognize this strategy and just how large of a market these consumers can be. As Shopee gains popularity in a market, they will then start to slowly move “up-market”, and cater to more urban and higher-income consumers. They’ve already followed this exact strategy in Southeast Asia, and this is the point they’ve reached in Brazil over the past year.
Shopee made its first big social push last fall, hiring over a dozen influencers with 1M+ followers to promote Shopee’s Black Friday sale (LINK). In addition, they also released their first Brazilian TV commercial last year.
It seems these initiatives are working. Shopee now consistently ranks in Brazil’s top 5 apps (while sister app Free Fire, is also the #1 grossing app). In addition, Shopee also moved Pine Kyaw (LINK), one of their key lieutenants in Vietnam who successfully helped Shopee fight off competitors (Tiki, Lazada, Sendo), to Brazil last May.
For the past year, the company has insisted publicly that the Brazil initiative is still a “test” initiated by the cross-border team. While this may have been true at first, it’s clear this is no longer a “test”, but rather a strategic focus for Shopee and posed to be the next battleground. It’s likely the company has chosen to remain tight-lipped so as to not tip off competitors, while they quietly “position the troops” to prepare for a larger assault.
For example, Shopee is also starting to allow local sellers to join the platform and list their local inventory (LINK). By definition, this is no longer a cross-border initiative (i.e. allowing their Southeast Asian sellers to sell to Brazilian consumers, and then shipping the goods directly from Asia. This is the model Aliexpress follows.).
This is the start of a localized marketplace. And similar to their early days in Southeast Asia, the goal is to reach the “tipping point” at which the marketplace becomes self-sustainable (this concept is discussed in our Q1 2019 letter; LINK). The weapons of choice in reaching critical mass: social media influencers to drive rust & awareness, free shipping & discounts to acquire / convert these new customers, and gamification of shopping to drive continued engagement, habit building, and repeat purchases.
Given all of this, and the strong (but early) traction in the local Shopee Brazil marketplace, investors need to keep an eye on this development. It is the smallest GMV contribution among Shopee’s countries currently, but a large inherent call option in the valuation. Something that so far, seems greatly underappreciated. I suspect at some point in the near future, Shopee’s management team will disclose more on the initiative, and at which point investors will be surprised by how Shopee managed to quietly build one of the largest marketplaces in Brazil.”
You can also take a peek at 10 Best Travel Stocks to Buy Right Now, and 10 Best Automotive Stocks to Invest in Now.
