We recently compiled a list of the 10 Most Volatile Stocks To Buy Right Now. In this article, we are going to take a look at where Builders FirstSource (NYSE:BLDR) stands against the other volatile stocks.

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.

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).

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.

Overall BLDR ranks 4th on our list of the most volatile stocks to buy. While we acknowledge the potential of BLDR as an investment, 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 BLDR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.