We recently compiled a list of the 10 Most Volatile Stocks Under $3 For Day Trading. In this article, we are going to take a look at where Navitas Semiconductor Corporation (NASDAQ:NVTS) stands against the pump and dump stocks.

Day trading involves buying and selling stocks within a single trading day to capitalize on short-term price movements. Volatile stocks are often preferred for their frequent price swings, creating opportunities for quick profits. Equity beta, which measures the sensitivity of a stock’s return to market changes, is a key metric often used by investors for gauging volatility. Day traders close their positions by the end of the trading day to avoid the risks associated with holding overnight, such as unexpected market events, earnings announcements, or global developments that can drastically impact stock prices before the next trading session begins. While penny stocks, particularly those priced under $3.00 per share, are appealing due to their low entry cost and potential for rapid gains, they also carry heightened risks like low liquidity and susceptibility to manipulation. The key takeaway for readers is that these trades shall be approached with cautiousness and a clear strategy with risk management in place.

READ ALSO: 10 Best Stocks For Day Trading

Stocks under $3.00 offer a distinct advantage in that they typically operate below the radar of hedge funds, which prioritize larger, more liquid investments to accommodate their substantial capital and complex strategies. Hedge funds, the most informed and skilled investors, leverage extensive resources, market expertise, and advanced analytics to gain a competitive edge. Their absence in the penny stock space leaves more room for retail investors to seize opportunities without competing against institutional investors’ sophisticated tactics. This lack of institutional interest can create less efficient pricing, offering well-researched retail traders the potential to identify undervalued stocks and profit from short-term volatility via day trading.

Short-term trading strategies become more attractive during times of macroeconomic uncertainty, which can further fuel volatility and create opportunities for swing trading. The main volatility index in the US market still remains elevated vs. its moving average as investors have a hard time digesting the tariffs situation and the abrupt cuts in federal workforce and spending. Bond yields are reluctant to price in lower rates in the future – despite odds of an economic recession rising substantially if compared to the beginning of the year, the potentially accelerating inflation, as fueled by tariffs, will likely keep rates high. Regardless of what happens, it is clear that Trump 2.0 gives investors plenty of anxiety – many have been actively seeking cheaper investments abroad, particularly in Europe, which has caused the US stock market to relatively underperform the rest of the world.

Small-cap stocks are usually the most affected during periods of heightened volatility. The good news is that the Bull-Bear Ratio compiled by Investors Intelligence fell to 1.3 during the past week, which, from a contrarian perspective, is a bullish signal. This means that pockets of opportunity might soon return to the penny stocks category, both for long-term investors and day traders. Despite short-term fears and uncertainty, the fundamentals of the US stock market remain solid, with future earnings estimates staying strong and potentially seeing an uplift from tax cuts later this year or next. We suggest considering stocks with a high equity beta, above 2.0, as this category will likely outperform in a rising market.

Our Methodology

We used Finviz to filter companies with a share price under $3.00 and that have an equity beta above 2.0. Then we compared the list with Insider Monkey’s proprietary database of hedge funds’ holdings as of Q4 2024 and included in the article the top 10 stocks with the highest hedge fund ownership.

Why are we interested in the stocks that hedge funds pile into? 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Navitas Semiconductor Corporation (NASDAQ:NVTS)

Number of Hedge Fund Holders: 13

Navitas Semiconductor Corporation (NASDAQ:NVTS) is a semiconductor company specializing in gallium nitride (GaN) and silicon carbide (SiC) power technologies. Its products enable higher efficiency, faster charging, and smaller designs for applications in consumer electronics, data centers, renewable energy, and electric vehicles. The company’s GaNFast and GeneSiC technologies replace traditional silicon-based power semiconductors, reducing energy loss and improving performance. NVTS serves industries requiring high-power conversion efficiency, including mobile charging, industrial power, and automotive electrification. Revenue is generated through the sale of power ICs, modules, and licensing agreements with global electronics manufacturers.

Navitas Semiconductor Corporation (NASDAQ:NVTS) stands out as the industry’s sole pure-play innovator in next-generation power semiconductors, focusing exclusively on GaN and SiC technologies without the distraction of conventional silicon devices. The company has experienced notable success in the mobile charger segment, with its GaN technology adopted by all major players in smartphones, tablets, and laptops. However, with current adoption at just 10%, there remains substantial room for growth. NVTS is concentrating its efforts on three key markets: AI data centers, onboard chargers for electric vehicles, and mobile charging solutions.

Financially, Navitas Semiconductor Corporation (NASDAQ:NVTS) is in a robust position, boasting a strong balance sheet with $87 million in cash and no debt, while aiming for EBITDA profitability by 2026. Despite challenges such as market headwinds and inventory corrections affecting the early months of 2024, the company predicts a recovery in the latter half of the year, driven by the stabilization of key markets and the realization of design wins. Last year, NVTS secured $450 million in lifetime design wins, which are expected to fuel revenue growth between 2025 and 2027. Additionally, the company’s technological edge is evident in its proprietary GaN power IC integration – protected by 200 patents – and its innovative trench-assisted planar silicon carbide technology, which combines superior performance with ease of manufacturing. With an equity beta of 2.14, NVTS is one of the most volatile stocks under $3 for day trading.

Overall NVTS ranks 8th on our list of the most volatile stocks under $3 for day trading. While we acknowledge the potential of NVTS 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 time frame. If you are looking for an AI stock that is more promising than NVTS 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.