Posted on 28 February 2012.
High Volatile Stocks are an active investor’s dream. Because the stock price often rises up and sharply falls off several times each year, these are stocks that are not conducive to buy-and-hold strategies. Instead, they offer the promise of massive returns on an investment that might otherwise offer no real opportunity for price appreciation or the security of a steady dividend.
This is not to say that high volatile stocks never offer the added bonus of dividends, but just that their attractiveness lies in the wild swings in their price rather than in their distributed profitability. The easiest way to imagine why these stocks are so profitable is to take an example of a stock that trades in a narrow range but bounces up and down between its low and high points about five times a year. An investor who buys at, say, $2 a share and holds it until it hits its ceiling at, say, $4 makes a tidy 100% return on his investment. If the stock repeats this performance five times a year, the investor has made a 500% profit.
Some High Volatile Stocks To Watch
American International Group (AIG) is a well-known stock with a high beta of 3.78. This means that AIG has almost four times as much volatility as an average S&P 500 stock. Currently trading at 34% below the S&P 500 average, this means that investors can immediately get in on the roller coaster at the bottom of one of its periodic swings. Buy low and sell high is always the key to making money in the market and AIG is at the bottom of its beta trough at the moment.
Appropriately enough, Goodyear Tire and Rubber (GT) is another stock that bounces around a lot. Currently at a 12% underperform compared to the broader S&P 500, the recent acceleration of auto sales in America means that the company is due for a definite reversal of fortune.
Large beta numbers on high volatile stocks offer a tremendous opportunity for involved, active traders to multiply their profits rapidly.
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