In this article, we will take a look at the 12 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. 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. 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. 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., 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.:
“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. 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. 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. 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 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 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 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 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 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 shares to $20 from $23 while maintaining a ‘Buy’ rating on the shares.
Carnival Corporation 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 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 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 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, 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 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 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 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, 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. 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. 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. 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.
5. RH (NYSE:RH)
Number of Hedge Fund Holders: 48
Beta Value: 2.27
Corte Madera, California-based RH (NYSE:RH) is a luxury lifestyle and home furnishings company offering its products to customers through retail galleries, source books and online at multiple stores including RH.com, and RHContemporary.com.
RH reported its financial results for Q2 2023 on September 7. It generated $800.5 million revenue and $76.5 million net income which translated to an adjusted EPS of $3.93, $1.33 more than the consensus.
Following the earnings release, Citigroup analyst Steven Zaccone lowered the price target on RH shares to $440 from $460 but maintained a ‘Buy’ rating. The target price represents a potential upside of 101.49% based on the share price on October 31.
4. Caesars Entertainment Inc. (NASDAQ:CZR)
Number of Hedge Fund Holders: 65
Beta Value: 2.9
Founded in 1937, Las Vegas, Nevada-based Caesars Entertainment Inc. is a leading casino entertainment provider offering diversified gaming, entertainment and hospitality amenities, one-of-a-kind destinations, and a full suite of mobile and online gaming and sports betting experiences.
On October 31, Caesars Entertainment Inc. reported the financial results for the third quarter. Its revenue increased by 4% y-o-y to $3.0 billion, while it generated a net income of $74 million. It reported a normalized EPS of $0.31 for the quarter, which exceeded the consensus by $0.04.
Following the earnings release, Barclays lowered the price target on Caesars Entertainment Inc. shares to $67 from $75 but maintained an ‘Overweight’ rating. The price target represents a potential upside of 66.67% based on the share price on October 31.
According to the Insider Monkey data on 910 leading hedge funds, 65 hedge funds were long Caesars Entertainment Inc. shares as of Q2 2023, with the total shares held by hedge funds valued at $1.2 billion. Parag Vora’s HG Vora Capital Management was the largest shareholder on record with ownership of 6.0 million shares valued at $306 million.
3. Block, Inc. (NYSE:SQ)
Number of Hedge Fund Holders: 66
Beta Value: 2.34
Formerly known as Square, Inc., San Francisco, California-based Block, Inc. (NYSE:SQ) is a global technology company with a focus on financial services. It comprises of Square, Cash App, TIDAL, and TBD, technology solutions that facilitate financial services for individuals and businesses of all sizes.
The only pure technology company on our list of 12 best high beta stocks to buy now, Block, Inc. shares have taken a battering this year with prices down nearly 36% since the beginning of the year, as of October 31. The tech company offers more than 81% upside potential from the current price levels based on the average analyst price target of $73.01.
After a “mixed” quarterly performance report released on November 2, Needham lowered the price target on Block, Inc. shares to $77 from $82, while maintaining a ‘Buy’ rating for the shares.
As of Q2 2023, Block, Inc. was among the favorites of hedge funds, with 66 of the 910 hedge funds tracked by Insider Monkey holding its shares valued at a whopping $3.8 billion. Cathie Wood’s ARK Investment Management was its biggest shareholder with ownership of 10.7 million shares valued at $714 million.
2. Tenet Healthcare Corporation (NYSE:THC)
Number of Hedge Fund Holders: 74
Beta Value: 2.2
Dallas, Texas-based, Tenet Healthcare Corporation (NYSE:THC) is a diversified healthcare services company. Its network includes 61 hospitals and 575 other facilities, including surgical hospitals, ambulatory surgery centers and other outpatient facilities.
On October 30, Tenet Healthcare Corporation released its financial results for the third quarter of 2023. Its net operating revenues increased by 5.5% y-o-y to $5.1 billion, while it reported a net income of $101 million. The normalized EPS was recorded at $1.44 for the quarter, which exceeded the consensus by $0.24.
As of Q2 2023, 74 of the 910 hedge funds tracked by Insider Monkey were long Tenet Healthcare Corporation, holding shares worth $2.7 billion. Larry Robbins’ Glenview Capital was the largest shareholder with ownership of 6.5 million shares valued at $526 million. It was followed by other prominent hedge fund shareholders such as Millennium Management, Marshall Wace LLP, and Citadel Investment Group, among others.
1. Tesla, Inc. (NASDAQ:TSLA)
Number of Hedge Fund Holders: 79
Beta Value: 2.29
Based in Austin, Texas, Tesla, Inc. (NASDAQ: TSLA), designs, develops, manufactures, sell and leases fully electric vehicles and energy generation and storage solutions. Its current portfolio of products includes Model 3 and Model S sedans, Model Y and Model X SUVs, while upcoming products include Cybertruck, Tesla Roadster and Tesla Semi – a light commercial vehicle.
Tesla, Inc. produced 430,488 vehicles in Q3 2023 and delivered more than 435,000 vehicles during the same period. The company has six large scale manufacturing facilities across the world, including its first plant in California, and gigafactories across Nevada, New York, Shanghai, Texas, and Berlin.
Tesla, Inc. is the best high beta stock to buy now based on hedge fund sentiment. Its shares were held by 79 hedge funds with total value of $6.5 billion, as of June 30.
In its Q2 2023 investor letter, Baron Funds, an investment management company, made the following comments about Tesla, Inc.:
“We continue to believe that Tesla is only scratching the surface of its potential. We regard announced partnerships between Tesla and its competitors in the quarter as important. In early June, Tesla agreed to provide Ford Motors access to Tesla’s electric vehicle (EV) charging technology and network. Other traditional and pure EV manufacturers, including General Motors, Rivian, and Volvo, quickly followed suit. We expect additional charging partnerships to ensue. In our view, these relationships validate Tesla’s charging technology and infrastructure as superior to other standards. Consolidation around a single technology should accelerate charging infrastructure deployment, diminish the risk of Tesla’s technology becoming obsolete, and lessen a key concern of hesitant EV purchasers.”
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This article is originally published at Insider Monkey.
