In this piece, we will take a look at the ten best stocks to buy for a quick return. For more stocks, head on over to 5 Best Stocks to Buy for a Quick Return.
The stock market is made up of thousands of stocks, belonging to a wide variety of industries and sectors. These are tracked by numerous variables that describe a stock's performance over a period of time, its valuation, future prospect, and market sentiment. One such variable that describes performance is stock price volatility. Simply put, the volatility of a stock price measures the change in a stock's price over its average over a certain time period. It allows investors to prepare their portfolios and take stock of potential upward or downward future movements and their magnitude.
However, volatility is not only used to determine market returns. It is also a very useful indicator when measuring the market's overall health to determine if a crash is in the making. On this front, research covering the stock market crash of 1987 suggests that just before and after the crash, volatility jumped rapidly before returning to normal soon after. The crash of 1987 is commonly known as Black Monday, when all major stock markets in the world dropped from 11% to a massive 45% in just a day. This was precipitated by the events of the previous week, where changes to tax law and weak economic data created massive selling pressure that was left without a release valve over the weekend and culminated in significant share selling on Monday.
As for what causes volatility, research from the University of Rochester makes an attempt to explain this as well. It points out that the firm's sector, namely technology, is perhaps the best predictor of its share price volatility as opposed to other factors such as firm size or a recent initial public offering (IPO). The research paper also corroborates the belief that stock market volatility can be analyzed as a leading recession indicator.
At this point, it's time to consider whether investing in volatile stocks can also generate stronger returns. Intuition would suggest this to be the case since high volatility comes through strong price movements that are larger than average. On the flip side, the chance for losses is great as well, as share price swings move both ways. Tons of research exists on whether the returns of volatile stocks are negative, or if these returns improve if small cap stocks are removed from the sample. Research from Robeco Asset Management takes all of this into account. It studies stock price volatility across the 1,000 largest U.S. stocks between 1963 and 2009 to check if volatility does indeed lead to more returns or if the returns due to volatility in research papers are because of methodology. The paper reveals that as a whole, returns increase when small caps are removed, but drop when they are studied over a larger time period. It also wagers that perhaps some of the returns in research are due to the look ahead bias.
Moving toward investors and how to deal with volatility, the billionaire founder of the Fisher Investments has some advice for volatility. Mr. Fisher believes that handling volatility is part and parcel of investing, as he advises that:
So people don't like volatility. The way they think of volatility is that when the market's up, it's good, and when the market's down it's volatile, which is wrong because there's upside volatility, downside volatility, and you really don't get a big up a lot market without volatility it's just volatility you'd like and don't think of as volatility. And because of that, you find yourself if you want those big long term returns, having to be subject to the volatility it comes as the kind that you don't like. And, for most people, that's not very pleasant and the reality is for some people that's a lot more unpleasant than for others.
Some of us seem to have been imbued for some reason with just an iron gut on volatility. And, in theory, you should have the view that if you get volatility to the downside, the unpleasant kind, you should like stocks more. I mean stocks are one of the rare categories where when stocks are up people like it, when they're down they don't like it; but when down they're cheaper, you think you'd like it more looking forward but people don't.
I've had people tell me all kinds of things that they do to cope with volatility from sucking their thumb, to drinking alcohol, to going out and taking a walk, to other forms of exercise. I hear from people that they can't sleep at night because of volatility. . . .You, really, if volatility bothers you, don't need to look at it your portfolio very often. You don't need read the news about what did the stock market did today. You don't need to pay attention to all the shrill yak yak yak because when the market falls you'll see most pundits saying that it'll fall further. You don't need to listen to that. You either are someone volatility doesn't bother much, or if it bothers you a lot, get somebody else to handle your investments for you. Don't look at them very often, maybe twice a year, and just let it go. Spend your life focused on other things, and don't make your investments a top of mind activity for your daily life.
Today we'll look at some stocks for a quick return based on volatility, out of which the top picks are Windtree Therapeutics, Inc. (NASDAQ:WINT), Kala Pharmaceuticals, Inc. (NASDAQ:KALA), and GreenLight Biosciences Holdings (NASDAQ:GRNA).
Image by Sergei Tokmakov www.thecorporateattorneys.com from Pixabay
Our Methodology
We used a stock screener to sift out stocks that have a volatility higher than 10% for the past month. For the uninitiated, volatility measures the standard deviation of the daily variations in a company's share price over the average share price. These can be expressed either in percentage terms or in absolute values, and we have used percentage volatility in ascending order for today's piece. As an added measure, only those rated a Strong Buy are included.
10 Best Stocks to Buy for Quick Return
10. Helbiz, Inc. (NASDAQ:HLBZ)
One Month Volatility: 13.37%
Helbiz, Inc. (NASDAQ:HLBZ) is an electric vehicle company that makes and sells bikes, scooters, and mopeds. The firm is headquartered in New York, New York.
Helbiz, Inc. (NASDAQ:HLBZ) is currently battling repeated short selling attempts on its stock, as the firm has entered into an agreement with a market tracker to identify entities hoping to profit from its share price drops. Four of the 943 hedge funds polled by Insider Monkey had bought the firm's shares in Q4 2022.
Kala Pharmaceuticals, Inc. (NASDAQ:KALA), Windtree Therapeutics, Inc. (NASDAQ:WINT), and GreenLight Biosciences Holdings (NASDAQ:GRNA) are met by Helbiz, Inc. (NASDAQ:HLBZ) in our list of potential stocks for a quick return.
9. GameSquare Holdings, Inc. (NASDAQ:GAME)
One Month Volatility: 13.39%
GameSquare Holdings, Inc. (NASDAQ:GAME) is a video game company based in Toronto, Canada. The firm conducts e-sports events, runs an influencer platform, and operates advertisem*nt campaigns.
GameSquare Holdings, Inc. (NASDAQ:GAME) upgraded its product portfolio in March 2023 when it launched a new video streaming and monetization platform. The firm was previously known as EngineGaming, and it changed its name to GameSquare Holdings in mid April 2023. By the end of last year's fourth quarter, two of the 943 hedge funds profiled by Insider Monkey had held a stake in the company.
8. Venus Concept Inc. (NASDAQ:VERO)
One Month Volatility: 13.54%
Venus Concept Inc. (NASDAQ:VERO) is a Canadian medical devices firm. It sells skin rehabilitation products, surgery equipment, hair removal devices, and others. The firm is based in Toronto, Canada.
Venus Concept Inc. (NASDAQ:VERO) disappointed investors in February 2022, when its fiscal year 2022 revenue guidance of $99.7 million was below analyst projections of $100.25 million. Three of the 943 hedge funds part of Insider Monkey's database had invested in the firm during last year's fourth quarter.
7. Rubicon Technologies, Inc. (NYSE:RBT)
One Month Volatility: 13.95%
Rubicon Technologies, Inc. (NYSE:RBT) is an American software company headquartered in Lexington, Kentucky. The firm operates a digital marketplace for recycling products and services.
Rubicon Technologies, Inc. (NYSE:RBT) saw some tough love from Canaccord in March 2023, when its share price was lowered to $4 from $5 based on soft results. Insider Monkey dug through 943 hedge fund holdings for last year's fourth quarter and found out that nine had held a stake in the company.
6. Summit Therapeutics Inc. (NASDAQ:SMMT)
One Month Volatility: 14.01%
Summit Therapeutics Inc. (NASDAQ:SMMT) is a biotechnology company that focuses on developing treatments to target infectious diseases. The firm is headquartered in Cambridge, Massachusetts.
Summit Therapeutics Inc. (NASDAQ:SMMT) revealed in January 2023 that it had completed an agreement to market its cancer drug in the U.S., Canada, Europe, and Japan. By the end of last year's December quarter, eight of the 943 hedge funds polled by Insider Monkey had held a stake in the company. Summit Therapeutics Inc. (NASDAQ:SMMT)'s latest earnings report released in March 2023 saw it end 2022 with $645 million in cash and equivalents, for a strong growth over 2021's $89 million.
Windtree Therapeutics, Inc. (NASDAQ:WINT), Kala Pharmaceuticals, Inc. (NASDAQ:KALA), Summit Therapeutics Inc. (NASDAQ:SMMT), and GreenLight Biosciences Holdings (NASDAQ:GRNA) are some great stocks with high volatility.
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Disclosure: None.10 Best Stocks to Buy for Quick Return is originally published on Insider Monkey.
As someone deeply immersed in the financial landscape with a comprehensive understanding of stock market dynamics and investment strategies, I can assert my expertise on the concepts presented in the article. My knowledge encompasses a broad range of financial instruments, market indicators, and investment philosophies.
The article revolves around the selection of stocks for a quick return, emphasizing the role of stock price volatility as a crucial factor in making investment decisions. Volatility, the measure of a stock's price fluctuations over time, is highlighted as a key variable influencing market performance and providing insights into potential market crashes.
The mention of the 1987 stock market crash, commonly known as Black Monday, serves as a historical reference to underscore the significance of volatility as an indicator of market health. The article draws from research conducted by the University of Rochester, which suggests that a firm's sector, particularly technology, is a primary predictor of share price volatility.
Furthermore, the piece explores the relationship between stock volatility and investment returns. It delves into research from Robeco Asset Management, examining the impact of volatility on returns across the 1,000 largest U.S. stocks between 1963 and 2009. The findings indicate that returns may increase when small-cap stocks are excluded, but the relationship is nuanced and influenced by various factors, including methodology.
The article then transitions to insights from the founder of Fisher Investments, who provides advice on navigating volatility. The billionaire emphasizes the inevitability of volatility in investing and suggests strategies for individuals to cope with market fluctuations, including reducing the frequency of portfolio checks and avoiding excessive exposure to market news.
Finally, the article introduces a list of potential stocks for a quick return, focusing on those with high volatility. It employs a stock screener to identify stocks with volatility exceeding 10% over the past month, further filtering the selection by including only those rated as Strong Buy.
The stocks highlighted in the article include Helbiz, Inc. (NASDAQ:HLBZ), GameSquare Holdings, Inc. (NASDAQ:GAME), Venus Concept Inc. (NASDAQ:VERO), Rubicon Technologies, Inc. (NYSE:RBT), and Summit Therapeutics Inc. (NASDAQ:SMMT), among others. Each stock is briefly profiled, providing key information such as the company's sector, recent developments, and relevant financial metrics.
In summary, the article combines historical context, academic research, expert insights, and practical stock screening to guide readers in identifying stocks with high volatility for potential quick returns in the market.
