In this article, we will take a look at the 12 best high beta stocks to buy now. To skip our analysis of the recent market trends and market activity, you can go directly to see the 5 Best High Beta Stocks to Buy Now.
Understanding the concept of beta is important before walking into the realm of high risk stock investments. Beta measures the volatility of a stock versus the overall market or an index that the stock tracks. The market always has a beta value of 1 while other stocks are assigned beta values based on their relative volatility. Stocks with volatility lower than the market have beta values lower than 1 while stocks with higher than market volatility have beta values that exceed 1.
A beta value alone doesn’t provide enough information for an informed investment decision but provides a significant data point for understanding the price volatility of a stock compared to the market. Stocks with low beta values are good investments for turbulent times as they are less prone to market movement which renders them relatively safe. Stocks with high beta values, on the other hand, provide greater opportunities for high rewards, at the risk of higher losses, as compared to the market, and are an excellent option for investment in times of market recovery and growth.
Our list of 12 best high beta stocks to buy now has also considered other factors, in addition to the beta values, of the selected stocks that can suggest positive prospects for these stocks in the future. These stocks have strong fundamentals as well as benefit from positive analyst and hedge fund sentiments. In addition, several of these stocks are benefitting from individual or industry specific features such as the cruise companies on our list, Royal Caribbean Cruises Ltd. (NYSE:RCL), and Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH), which displayed better than expected top- and bottom-line results due to a robust consumer demand for travel experiences.
The Invesco S&P 500® High Beta ETF is an Exchange Traded Fund that invests at least 90% of its total assets in the securities that comprise the S&P 500® High Beta Index. The Index consists of the 100 stocks from the S&P 500® Index with the highest sensitivity to market movements, or beta, over the past 12 months. Over the last 3 years, the ETF has performed significantly better than the S&P 500 Index, evident from the total return generated by the fund which amounts to 20.15% compared to a measly 10.15% for the S&P 500 Index.
The portfolio of the Invesco S&P 500® High Beta ETF is currently heavily weighted by the technology sector with more than 37% of the weight allocated to the securities from the sector. It is followed by consumer discretionary with nearly 19% and financials with nearly 18% of the portfolio weightage. Transocean Ltd (NYSE:RIG), Marathon Oil Corporation (NYSE:MRO), and Devon Energy Corporation (NYSE:DVN) are the three high beta energy stocks that made our rankings and are discussed below.
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Methodology
We shortlisted stocks with a beta value of more than 1.0, strong fundamentals, positive ratings, and positive analyst price targets, as of October 31. Out of this list, we picked the top 50 based on the beta values and further ranked this selection based on the hedge fund sentiment assessed from Insider Monkey’s database of elite hedge funds, tracked as of the second quarter of 2023. The top 12 stocks based on hedge fund sentiment, ranked in the ascending order of hedge fund shareholders, have made onto our list of 12 best high beta stocks to buy now.
12 Best High Beta Stocks to Buy Now
12. Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH)
Number of Hedge Fund Holders: 35
Beta Value: 2.57
Miami, Florida-based Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) is a leading global cruise company operates the Norwegian Cruise Line, Oceania Cruises, and Regent Seven Seas Cruises brands. Its fleet comprises of 31 ships with more than 65,000 berths providing access to nearly 700 destinations globally.
Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) is among some of the worst performing stocks on our list of 12 best high beta stocks to buy now since the onset of the coronavirus pandemic. The stock is trading nearly 78% below the pre-pandemic highs. Analysts expect the stock to stage a resurgence with an average price target of $19.03, which represents a 39.72% potential upside to the current price.
On October 24, Wells Fargo analyst Daniel Politzer reiterated his belief in Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH) shares with an ‘Overweight’ rating and a price target of $19, compared to the previous target price of $22.
As of Q2 2023, 35 of the 910 hedge funds tracked by Insider Monkey were long Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH), holding shares worth $690 million. Its largest hedge fund shareholder was John W. Rogers’ Ariel Investments with ownership of 6.6 million shares valued at $144 million.
In its Q2 2023 investor letter, Ariel Investments, an investment management company, made the following comments about Norwegian Cruise Line Holdings Ltd. (NASDAQ:NCLH):
“Norwegian Cruise Line Holdings Ltd. (NCLH) delivered the second highest total return in the S&P 500 during the quarter. Robust consumer demand for travel experiences drove a top- and bottom-line earnings beat. The strong WAVE season is also translating to solid forward booking trends inclusive of increased occupancy capacity at higher pricing. Looking ahead, NCLH remains focused on right sizing its cost base and improving margins to strengthen its foundation for sustainable and profitable growth. With an experienced management team at its helm, a young average fleet and solid liquidity position, we continue to believe the risk / reward remains sharply skewed to the upside.”
11. Wayfair Inc. (NYSE:W)
Number of Hedge Fund Holders: 37
Beta Value: 3.20
Wayfair Inc. (NYSE:W), based in Boston, Massachusetts, is a leading e-commerce company focused on the sale of home goods and furniture items across a broad range of categories. Formerly known as CSN Stores, the company offers millions of items across multiple countries.
On November 1, Wayfair Inc. (NYSE:W) released its financial results for Q3 2023. Its revenue increased by 4% y-o-y to reach $2.9 billion while net loss shrunk by 42% y-o-y to $163 million. At -$0.13, the adjusted EPS for the quarter exceeded consensus estimates by $0.34.
Following the earnings release, DA Davidson lowered the price target on Wayfair Inc. (NYSE:W) shares to $80 from $100 but maintained a ‘Buy’ rating. The share price represents a potential upside of 87.18% based on the share price on October 31.
Wayfair Inc. (NYSE:W) ranks #1 on our list of 12 best high bet stocks to buy now in terms of its beta value of 3.20. It is closely followed by Transocean Ltd (NYSE:RIG) and Caesars Entertainment Inc. (NASDAQ:CZR), respectively.
10. Transocean Ltd (NYSE:RIG)
Number of Hedge Fund Holders: 38
Beta Value: 2.97
Steinhausen, Switzerland-based Transocean Ltd (NYSE:RIG) is a leading international provider of offshore contract drilling services for oil and gas wells. It specializes in deepwater and harsh environment drilling services and operates a fleet of 37 mobile offshore drilling units.
Transocean Ltd (NYSE:RIG) recently issued a quarterly fleet status report which provides updates for the company’s fleet of offshore drilling rigs. During the quarter, the company won four new contracts with aggregate incremental backlog of approximately $745 million. The addition of these contracts brings the total backlog for the company to nearly $9.4 billion.
As of Q2 2023, 38 of the 910 hedge funds tracked by Insider Monkey held Transocean Ltd (NYSE:RIG) shares valued at a combined total of $962 million. David Greenspan’s Slate Path Capital was its largest hedge fund shareholder with ownership of 23.3 million shares valued at $163 million.
9. Carnival Corporation (NYSE:CCL)
Number of Hedge Fund Holders: 40
Beta Value: 2.46
Miami, Florida-based Carnival Corporation (NYSE:CCL) is a global cruise company and one of the largest vacation companies in the world. Its portfolio comprises of nine leading cruise brands including Carnival Cruise Lines, Holland America Line, Princess Cruises, Cunard, AIDA Cruises, and Costa Cruises, among others.
On September 29, Carnival Corporation (NYSE:CCL) released the financial results for the quarter ended August 31, 2023. Its revenues increased by 59% y-o-y to $6.9 billion, while it generated a net income of $1.1 billion compared to a net loss of $770 million. The normalized EPS for the quarter was recorded at $0.86, beating the consensus by $0.13.
Following the earnings release, UBS analyst Robin Farley lowered the price target on Carnival Corporation (NYSE:CCL) shares to $20 from $23 while maintaining a ‘Buy’ rating on the shares.
Carnival Corporation (NYSE:CCL) is subject to bullish sentiment from a large number of hedge funds as 40 of the 910 hedge funds held its shares as of Q2 2023, with the total hedge fund holdings valued at $956 million.
8. Marathon Oil Corporation (NYSE:MRO)
Number of Hedge Fund Holders: 43
Beta Value: 2.31
Based in Houston, Texas, Marathon Oil Corporation (NYSE:MRO) is an independent oil and gas exploration and production (E&P) company focused on four resource plays in the U.S. – Eagle Ford, Texas; Bakken, North Dakota; STACK and SCOOP in Oklahoma and Permian in New Mexico and Texas, complemented by an integrated gas business in Equatorial Guinea.
Marathon Oil Corporation (NYSE:MRO) released its Q3 2023 financial results on November 1. It generated $1.8 billion in total revenues and $453 million in net income. The normalized EPS, at $0.77, exceeded the consensus estimates by $0.08.
Marathon Oil Corporation (NYSE:MRO) increased the quarterly base dividend by 10% to $0.11 per share and also increased the share repurchase authorization to $2.5 billion. During the first nine months of 2023, the company has returned $1.3 billion of capital to shareholders through share repurchases and dividend payments.
As of Q2 2023, 43 hedge funds tracked by Insider Monkey held shares of Marathon Oil Corporation (NYSE:MRO), worth $984 million. Steve Cohen’s Point72 Asset Management was its largest hedge fund shareholder with ownership of 5.9 million shares valued at $137 million.
7. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 45
Beta Value: 2.32
Devon Energy Corporation (NYSE:DVN) is a leading oil and gas producer based in Oklahoma with a multi-basin portfolio underpinned by world-class Delaware Basin position.
In August, the board of directors of Devon Energy Corporation (NYSE:DVN) declared a quarterly dividend of $0.49 per share which includes fixed as well as a variable component. The company also repurchased 3.8 million of its shares during Q2 2023 at a total cost of $200 million.
On October 12, Mizuho analyst Nitin Kumar lowered the price target on Devon Energy Corporation (NYSE:DVN) shares to $58 from $62 but maintained a ‘Buy’ rating for the shares.
As of Q2 2022, 57 of the 910 hedge funds tracked by Insider Monkey owned shares of Devon Energy Corporation (NYSE:DVN), valued at $1.7 billion. Its largest shareholder was Rajiv Jain’s GQG Partners with ownership of 14.9 million shares valued at $822 million.
6. Royal Caribbean Cruises Ltd. (NYSE:RCL)
Number of Hedge Fund Holders: 45
Beta Value: 2.45
Miami, Florida-based Royal Caribbean Cruises Ltd. (NYSE:RCL) is a leading cruise company with a global fleet of 64 ships traveling to more than 1,000 destinations around the world. It owns and operates three cruise brands: Royal Caribbean International, Celebrity Cruises, and Silversea Cruises, and holds 50% in a joint venture that operates TUI Cruises and Hapag-Lloyd Cruises.
On October 26, Royal Caribbean Cruises Ltd. (NYSE:RCL) released its financial results for Q3 2023. Its total revenue increased by 39% y-o-y to $4.2 billion, while it generated a net of $1.0 billion. At $3.85, its normalized EPS exceeded the consensus estimates by $0.46.
As of Q2 2023, Royal Caribbean Cruises Ltd. (NYSE:RCL) shares were held by 45 out of 910 hedge funds tracked by Insider Monkey, with a total value of $1.6 billion. Prominent hedge fund shareholders included Citadel Investment Group, D E Shaw, and Ariel Investments, among others.
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Disclosure: None. 12 Best High Beta Stocks to Buy Now is originally published on Insider Monkey.