High-risk stocks often deliver the biggest gains.
Risk management is the core of successful long-term investing. Investors comfortable with risk can set themselves up for huge long-term gains by identifying the best highly volatile, high-beta stocks to buy. Stocks with betas of 1.5 or higher tend to be at least 50% more volatile than the S&P 500. That volatility can generate huge swings in share price in the near term that create too much risk for some investors. For aggressive investors willing to ride out the potential volatility, here are seven high-risk stocks to buy with betas of at least 1.5, according to CFRA.
Ameriprise Financial (ticker: AMP)
Ameriprise Financial is a financial planning, asset management and insurance company. The stock has demonstrated extreme volatility in 2020, trading from about $180 in February to less than $82 in March and then back up to about $163 in June. Analyst Cathy Seifert says Ameriprise's advice and wealth management division is a growth source with margin expansion potential. Seifert says the stock is undervalued based on her earnings projections, and its 2.7% dividend rewards investors willing to ride out the volatility. She estimates revenue will grow between 4% and 6% in 2021. CFRA has a "buy" rating and $140 price target for AMP stock.
Freeport-McMoRan is the world's largest public copper producer and a top 10 gold producer. In the first half of 2020, Freeport shares have traded as high as $13.64 and as low as $4.82, a clear demonstration of the risk investors are taking when they buy the stock. But analyst Matthew Miller says normalized global copper demand will be "robust," and the company's Grasberg property in Indonesia and Lone Star assets in Arizona are the core of his growth thesis for Freeport over the next two years. CFRA has a "buy" rating and $13 price target for FCX stock.
United Rentals (URI)
United Rentals is the world's largest construction, industrial and utility equipment rental chain. Analyst Elizabeth Vermillion says United's fleet productivity should return to normal levels by the fourth quarter of 2020. In the longer term, Vermillion says nonresidential construction and specialty projects will drive revenue growth for United, while industrial and oil and gas demand has likely bottomed. State, local and even federal infrastructure spending could also boost demand. Recent infrastructure bill proposals in Washington have ranged from $500 billion to $1 trillion. CFRA has a "buy" rating and $146 price target for URI stock.
Boeing Co. (BA)
Boeing has more than $54 billion in debt. It had zero new orders and 108 order cancellations in April. Boeing's 737 Max groundings and potential liabilities create an additional level of uncertainty for investors. Under the circumstances, it may be the highest-risk stock on this list. However, analyst Colin Scarola says the restart of 737 Max production and the company's goal of getting the plane recertified to fly by July could eliminate some of those near-term concerns. Scarola says Boeing shares are undervalued based on his longer-term outlook. CFRA has a "buy" rating and $231 price target for BA stock.
Nvidia Corp. (NVDA)
Nvidia is the perfect example of a high-risk stock that has been a winning investment. For investors willing to ride out the volatility, Nvidia shares are up more than 1,600% in the last five years because of booming demand for high-end graphics cards. Nvidia is up about 60% year to date in 2020, and analyst Angelo Zino says demand from data centers and online gaming should continue to drive long-term revenue growth. Artificial intelligence, autonomous vehicles and virtual reality will also provide tailwinds for Nvidia. CFRA has a "buy" rating and $400 price target for NVDA stock.
SVB Financial Group (SIVB)
SVB Financial is a niche commercial financial services company that focuses on technology, life sciences, premium wineries and venture capital/private equity firms. In the last two years alone, the volatile stock has traded about as high as $333 and as low as $127. Analyst Pauline Bell says SVB's profitability metrics are well above average compared with other regional banks, and its fee generation is robust. SVB's profitability is exposed to recent interest rate cuts, but Bell says the company has high liquidity levels and healthy loan growth. CFRA has a "buy" rating and $190 price target for SIVB stock.
Analyst Kenneth Leon says today's Citigroup is a completely different stock from the Citigroup that nearly went bankrupt in 2008. After more than a decade of stress tests, asset sales and capital building, Leon says, Citigroup has plenty of financial flexibility to navigate the downturn without even cutting its dividend. Leon says Citigroup's business is also more diversified than other big U.S. banks. Even amid a recession and 0% interest rates, earnings per share in 2020 could reach $5.20 and $7 in 2021, Leon projects. CFRA has a "buy" rating and $70 price target for C stock.
Aggressive investors could buy these high-risk stocks:
-- Ameriprise Financial (AMP)
-- Freeport-McMoRan (FCX)
-- United Rentals (URI)
-- Boeing Co. (BA)
-- Nvidia Corp. (NVDA)
-- SVB Financial Group (SIVB)
-- Citigroup (C)
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