The beta makes these stocks worth the risk.
Volatile stocks can generate big returns for investors brave enough to hold on for the ride. In statistical terms, a stock's beta is the slope of the line through a regression of data points plotting an individual stock's daily returns against the returns of the overall market. In practical terms, beta is simply a ratio of how much a stock tends to move up or down on a given day relative to the market. Here are seven stocks to buy with betas of at least 1.7 and average daily volume of at least 1 million shares, according to Morningstar.
California Resources Corp. (ticker: CRC)
California Resources is an oil and gas exploration and production company. The stock demonstrated just how volatile it can be earlier this month when it gained more than 50% in a day following an earnings beat. Analyst Dave Meats says management has taken major strides in improving the balance sheet, and the company generated an impressive $151 million in third-quarter free cash flow. California Resources has a beta of 2.8, making it the most volatile stock on this list. Morningstar has a "buy" rating and $16 fair value estimate for CRC stock.
Laredo Petroleum (LPI)
Laredo Petroleum is an oil and natural gas producer that operates primarily in the Permian Basin in Texas. Laredo shares are down nearly 80% overall in the past three years as the oil market has struggled to gain traction. However, Meats says the stock is deeply undervalued at under $3 per share given the company is finally showing signs of a fundamental turnaround. Meats says Laredo is a highly efficient operator with a decent balance sheet. Laredo has a beta of 1.7. Morningstar has a "buy" rating and $5 fair value estimate for LPI stock.
ON Semiconductor Corp. (ON)
ON Semiconductor is a power management and connectivity chip producer. Like many other semiconductor stocks, ON has had a difficult year from a fundamental standpoint due to a cyclical market downturn. Operating income is down more than 50% year-to-date. However, analyst Seth Sherwood says ON's third-quarter earnings and fourth-quarter guidance suggest the business is stabilizing. In the near term, Sherwood says the trade war and other macroeconomic headlines will continue to add to the stock's volatility. ON has a beta of 1.8. Morningstar has a "buy" rating and $26 fair value estimate for ON stock.
Twilio is a communications services specialist, focusing on voice, messaging, video and other applications for software developers. The stock is up 30% in the past year but down 26% in the past six months. Twilio shares initially dropped more than 12% after fourth-quarter guidance disappointed the market due to an overbilling issue in past quarters. Fortunately, analyst John Barrett says the billing stumble is a temporary problem and won't impact Twilio's long-term growth outlook. Twilio has a beta of 2. Morningstar has a "buy" rating and $132 fair value estimate for TWLO stock.
Uber Technologies (UBER)
Roughly six months after its high-profile initial public offering, ridesharing giant Uber is still struggling to find its sea legs in the market. The stock remains down more than 30% from its IPO price of $45. Despite the volatility, Ali Mogharabi says Uber is on track to become profitable in 2024. Uber has successfully expanded into food delivery with Uber Eats, and gross bookings strength could reaccelerate revenue growth in the second half of 2019. Uber has a beta of 1.8. Morningstar has a "buy" rating and $58 fair value estimate for UBER stock.
United Rentals (URI)
United Rentals is the world's largest equipment rental company, offering more than 3,300 classes of equipment. The volatile stock is up 22% in the past month, but analyst Scott Pope says there is more upside ahead thanks to United's industry-leading logistics and technology. United has expanded its fleet of equipment and the company is now able to offer a much wider range of solutions. Pope says equipment rental is a cost-effective alternative to buying. United Rentals has a beta of 1.8. Morningstar has a "buy" rating and $185 fair value estimate for URI stock.
Weibo Corp. (WB)
Weibo is a microblogging platform in China that's often compared to U.S. social media platform Twitter (TWTR). Weibo has nearly 500 million users, and analyst Chelsey Tam says second-quarter growth in both monthly active users (4.5%) and daily active users (3.9%) was encouraging. Shares are down 24% in the past six months as the trade war drags on. Tam says Weibo appears undervalued, but its outlook has a high degree of uncertainty. Weibo has a beta of 1.8. Morningstar has a "buy" rating and $66 fair value estimate for WB stock.
Top stocks to buy with good beta:
-- California Resources Corp. (CRC)
-- Laredo Petroleum (LPI)
-- ON Semiconductor Corp. (ON)
-- Twilio (TWLO)
-- Uber Technologies (UBER)
-- United Rentals (URI)
-- Weibo Corp. (WB)
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