2019 will be a year of uncertainties. The US-China trade war, which seemed to be behind us following the Buenos Aires G20 verbal agreement between presidents, now seem to dissipate, and even escalate following the arrest of a senior Huawei manager in Canada. On top of those, additional concerns are growing as Russia and Ukraine might embark on another round of hostilities, the Turkish lira becoming ever less stable, Qatar leaving OPEC, and other factors around the world.
On that background, 2019 seems to be a great year for day traders. Day traders live of volatility. A stock that would increase every day by 0.1% would make about 20% upside per year, but would not be interesting for day traders. “Day traders’ oxygen is extreme movements, either upwards or downwards, during the trading day. So while someone like Warren Buffett prefers Apple over Tesla, because it fits his style as an investor, I would prefer Elon Musk’s company - because as a day trader Tesla gives me so much more leeway and earnings potential - because of Tesla's volatility”, tells us Meir Barak, founder of day trading education leader, Tradenet. You can watch his Youtube videos here.
In this article we are going to take a look at the 30 most volatile S&P 500 Index constituents over the last 30 days and determine which ones are most crowded by hedge funds. Some hedge funds might be facing large investor redemption requests in the fourth quarter and may be forced to start liquidating their holdings. This may lead to some predictable short-term price movements for day traders and present a buying opportunity at discounted prices for long-term investors. Here are the 30 most stocks
[table] Company, Ticker, Std. Dev (Daily Return), No. of HFs Pacific Gas & Electric Co.,PCG, 0.077459603,60 Red Hat Inc., RHT, 0.061072742, 21 Advanced Micro Devices , AMD ,0.054299054, 28 NVIDIA Corporation , NVDA ,0.046977279, 56 Under Armour Inc. , UA ,0.044395534, 28 Align Technology Inc., ALGN,0.041760142, 37 ABIOMED Inc. , ABMD , 0.041636758, 22 Under Armour Inc. , UAA ,0.0407867 , 28 Nektar Therapeutics, NKTR,0.039767773, 27 Coty Inc. , COTY, 0.039559227, 24 Wynn Resorts Limited , WYNN ,0.038800635, 43 Newfield Exploration Company , NFX,0.037763102, 39 Edison International, EIX ,0.036048605, 25 Mohawk Industries Inc. , MHK ,0.036034964, 49 Western Digital Corporation, WDC ,0.035426694, 33 Netflix Inc. , NFLX , 0.034807386, 84 L Brands Inc. , LB , 0.034625905, 27 Take-Two Interactive Software Inc. , TTWO, 0.03461987, 58 IPG Photonics Corporation , IPGP ,0.034224936, 16 Twitter Inc., TWTR , 0.034140621, 42 United Rentals Inc. , URI ,0.033937192, 48 TripAdvisor Inc., TRIP ,0.032688949, 26 Newell Brands Inc. , NWL ,0.032565925, 36 General Electric Company , GE ,0.032426698, 46 Activision Blizzard Inc , ATVI ,0.032254729, 74 American Airlines Group Inc. , AAL,0.032041571, 39 Amazon.com Inc. , AMZN ,0.031799286, 150 Salesforce.com Inc , CRM ,0.031761367, 86 Autodesk Inc. , ADSK, 0.031539591, 66 DXC Technology Company , DXC,0.031419439,50 [/table]
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At the end of the third quarter, a total of 150 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 9% from one quarter earlier. By comparison, 136 hedge funds held shares or bullish call options in Amazon.com Inc (NASDAQ:AMZN) heading into this year. Amazon.com Inc (NASDAQ:AMZN) was also the third most popular hedge fund stock at the end of September (see the list of 30 most popular stocks among hedge funds) The daily standard deviation in AMZN’s stock price over the last 90 days was 3.2%. Amazon was trading at $1990 three months ago, vs. $1640 right now.
Salesforce.com Inc (NASDAQ:CRM) ranks second in our list with also a daily standard deviation of 3.2% over the last 90 days. At the end of the third quarter, a total of 86 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 5% from the previous quarter. On the other hand, there were a total of 72 hedge funds with a bullish position in Salesforce.com Inc (NASDAQ:CRM) at the beginning of this year. CRM shares were trading as high as $161 in September, vs. its current price of $137.
Netflix, Inc. (NASDAQ:NFLX) ranks third with a daily standard deviation of 3.5%. At Q3's end, a total of 84 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from one quarter earlier. On the other hand, there were a total of 66 hedge funds with a bullish position in Netflix, Inc. (NASDAQ:NFLX) at the end of June. Some of these hedge funds were probably already dumping their NFLX holdings as the stock plunged from $381 on October 1st to $270 today.
Activision Blizzard, Inc (NASDAQ:ATVI) ranks fourth in our list with a daily standard deviation of 3.2%. Heading into the fourth quarter of 2018, a total of 74 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from the previous quarter. Activision Blizzard Inc. shares also took a dive from $83 at the end of September to $48 today.
Autodesk, Inc. (NASDAQ:ADSK) ranks fifth with a daily standard deviation of 3.2%. At Q3's end, a total of 66 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 10% from one quarter earlier. Autodesk, Inc. (NASDAQ:ADSK) shares declined from $156 at the end of September to $135 today.
We don’t want to give the wrong impression that hedge funds aren’t talented stock pickers. There are good as well as bad hedge fund managers and our proprietary methodologies try to identify the best and worst hedge fund managers and their best and worst stock picks. For example our latest list of best hedge fund stocks lost only 1.5% since November 15th vs. a loss of 3.3% for the S&P 500 ETF (SPY). Our latest list of the worst hedge fund stocks (which we recommended our subscribers to short) lost an average of 8.5% during the same period. So, our subscribers were able to beat the S&P 500 Index both on the long and short sides of their portfolios (read the details here).
Volatility brings lots of opportunities and if you know what you are doing you can enhance your returns by exploiting the predictable moves of the elephants in the stock market.
Disclosure: None. This article originally published at Insider Monkey.