In this piece, we will take a look at the 11 most volatile stocks under $5 for day trading. If you want to skip our introduction to stock indicators and the broader market environment, then take a look at 5 Most Volatile Stocks Under $5 For Day Trading.
While all stocks can be bought on the market, not all stocks are equal. There are several ways in which analysts and investors analyze a stock before making a buying or selling decision. These can be separated along the lines of financial statements or market performance. The financial analysis of a stock is called fundamental analysis and it evaluates a company's ability to earn profit, generate cash flows, maintain debt sustainability, and demonstrate other indicators of fiscal health.
On the other hand, evaluating a stock's market performance is called technical analysis. This plots the share price on a graph over a fixed time period and then analyzes the trends to see if any factors are driving the price up or down. Some metrics that are used in technical analysis are moving averages, relative strength indicators (RSIs), standard deviations of returns, and beta analysis. These measure the momentum behind share price surges or drops to try to determine whether the trend will hold or reverse.
Within these, the indicator used to measure stock price volatility is the beta. A beta is calculated by determining the relationship between the fluctuation in a stock price and the price of a benchmark index. By doing this, it allows analysts to make a guess about the intensity of stock price shifts with respect to broader market trends, or in other words, it allows them to calculate whether a stock's price will follow or oppose the underlying index's direction and the intensity of this shift.
The intensity or the magnitude of the changes in a stock's price is called volatility and it is one of the biggest generators of returns on the stock market. Of course, the risk for a loss is equally higher since volatile stocks move in greater magnitudes both negatively and positively.
Naturally, while any large upward swings in share price will generate euphoria amongst investors, a move in the opposite direction can also make them nervously sell their stocks. This is also what Ken Fisher's Fisher Investments believes as it shows that the short term downswings can lead to long term investors hurriedly liquidating their investments to avoid potential future losses. While selling a stock can enable an investor to avoid potential losses, if it is mismatched with an investor's time horizon, then it can lead to missing future returns as well. Citing Global Financial Data's data, the hedge fund shows that there is also a way to avoid the high volatility that the stock market is typically known for and also benefit from its returns - in a rare example of having one's cake and eating it as well. So what is this secret sauce?
Well, the data shows that over a rolling 30 year horizon, the S&P 500 averages 11.1% total returns with a standard deviation of 1.3%. Over a similar horizon, the much stabler bond market generates 5.6% in average returns but with a higher standard deviation of 2.7%. Standard deviation is another mathematical measure of volatility and it measures the average fluctuation of a data set's values to its mean.
Shifting gears to focus on the broader stock market, right now it appears that the era of rapid interest rate hikes might be over for now. The latest bit on the economic data front comes from the Commerce Department's Bureau of Economic Analysis (BEA). This showed that the U.S economy grew by 5.2% in the third quarter, in an upward revision from the previous growth estimate of 4.9%. November 2023 has been an eventful month for the market as the S&P 500, the NASDAQ Composite, and the Dow Jones Industrial Average (DIA) are up by 8.51%, 10.95%, and 7.19% in November, and with the month coming to an end, investors were focused on the Federal Reserve's preferred inflation data, the Personal Consumption Index (PCE). Heading into the release, they were expecting the PCE to rise by 0.2% on a monthly basis to drop by more than half over the September figures. Actual results met the estimates and annually, the PCE index stood at 3.0%.
With these details in mind, and as the market starts to price in a low rate environment, we decided to take a look at the top volatility stocks that are under $5. Some notable picks are Independence Contract Drilling, Inc. (NYSE:ICD), Pagaya Technologies Ltd. (NASDAQ:PGY), and Bakkt Holdings, Inc. (NYSE:BKKT).
11 Most Volatile Stocks Under $5 For Day Trading
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Our Methodology
To make our list of the best volatile stocks under $5 for day trading, we first made a list of all stocks that trade below $5 and have a beta greater than 2. Then, the top 30 among these were sorted by the number of hedge funds that had bought their shares as of Q3 2023 and the top stocks were chosen.
Alpine 4 Holdings, Inc. (NASDAQ:ALPP) is an industrial products company that sells products used in cars, kitchens, furnaces, and other areas. November was an eventful for the month as its subsidiary moved ahead in the certification of a drone in Dubai.
As of Q3 2023, one hedge fund out of the 910 part of Insider Monkey's database was Alpine 4 Holdings, Inc. (NASDAQ:ALPP)'s investor. This investor was John Zero's Bourgeon Capital who owned just $10 worth of shares.
Just like Pagaya Technologies Ltd. (NASDAQ:PGY),Independence Contract Drilling, Inc. (NYSE:ICD), and Bakkt Holdings, Inc. (NYSE:BKKT), Alpine 4 Holdings, Inc. (NASDAQ:ALPP) is a top stock under $5 for day trading.
Phunware, Inc. (NASDAQ:PHUN) is an American software company headquartered in Austin, Texas. It provides software products that enable developers to develop mobile applications. The firm has beaten analyst EPS estimates in only one out of its four latest quarters and the shares are rated Buy on average.
During this year's third quarter, one out of the 910 hedge funds profiled by Insider Monkey had held a stake in the company. This lone Phunware, Inc. (NASDAQ:PHUN) investor is an Cumming and Joseph Steinberg's Leucadia National as it owns 98,743 shares that are worth $17,665.
BioRestorative Therapies, Inc. (NASDAQ:BRTX) is a small American biotechnology company that is headquartered in Melville, New York. It is among the handful of biotechnology companies that are using stem cells to develop disease treatments. Some ailments that BioRestorative Therapies, Inc. (NASDAQ:BRTX) is targeting with its products include those of the spine as well as obesity.
Only one hedge fund out of the 910 tracked by Insider Monkey had bought BioRestorative Therapies, Inc. (NASDAQ:BRTX) 's shares during Q3 2023. The lone shareholder is Josh Overdeck and David Siegel's Two Sigma Advisors as it owned 24,600 shares that are worth $44,034.
Digihost Technology Inc. (NASDAQ:DGHI) is a blockchain company and a cryptocurrency miner headquartered in Houston, Texas. The recovery in Bitcoin's price in 2023 has helped the firm on the financial front, with its third quarter results showing a 46% annual revenue growth.
For their September quarter of 2023 shareholdings, two out of the 910 hedge funds surveyed by Insider Monkey were Digihost Technology Inc. (NASDAQ:DGHI)'s shareholders.
7. uCloudlink Group Inc. (NASDAQ:UCL)
Latest Beta Reading: 4.29
Number of Hedge Fund Investors In Q3 2023: 2
uCloudlink Group Inc. (NASDAQ:UCL) is a Hong Kong based telecommunications company with an interesting business model that allows people to maintain connectivity when crossing borders. It has done well on the financial front lately, by having beaten analyst EPS estimates in three out of its four latest quarters.
After digging through 910 hedge fund portfolios for this year's third quarter, Insider Monkey found that two had invested in the company. Among these, the biggest uCloudlink Group Inc. (NASDAQ:UCL) shareholder was Jim Simons' Renaissance Technologies due to its $111,000 stake.
Portage Biotech Inc. (NASDAQ:PRTG) is a small biotechnology company that is developing cancer treatments. Its shares are rated Buy on average and analysts have set an average share price target of $6
During 2023's September quarter, two out of the 910 hedge funds profiled by Insider Monkey had bought and owned Portage Biotech Inc. (NASDAQ:PRTG)'s shares. Steven Boyd's Armistice Capital was the largest shareholder since it owned $4.1 million worth of shares.
Independence Contract Drilling, Inc. (NYSE:ICD), Portage Biotech Inc. (NASDAQ:PRTG), Pagaya Technologies Ltd. (NASDAQ:PGY), and Bakkt Holdings, Inc. (NYSE:BKKT) are some volatile stocks under $50.
