You likely already know that risk is an important consideration when making any investment.
While it can be difficult to measure or quantify the risk a stock possesses, beta is one mechanism.
Beta is the measure of a stock’s volatility, relative to the movement of the rest of the stock market.
The S&P 500 is typically used as the benchmark by which any stock’s beta is calculated.
The S&P 500 is a market-capitalization-weighted index of the 500 largest US publically traded companies.
Since the companies are so large, they’re normally considered to be very low risk.
The S&P 500 index is given a beta of 1.0.
Individual stocks have a beta score ranking in relation to how much they deviate from the general movement of the market.
Any stock that swings more than the market (indicating it’s more volatile) will have a score above 1.0.
Further, any stock that moves less than the overall market (indicating it’s less volatile) will have a beta score below 1.0.
Since volatility essentially translates to higher risk, this means there is a higher chance of making losses on your investment.
However, as you probably well know, higher risk also means the potential for higher reward.
We’ve put together a list of some of the best beta stocks on the market for investors looking for hefty returns.
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Best High Beta Stocks
United Rentals, Inc. (NYSE: URI)
As the world’s largest equipment rental company, United Rentals had 13% of the North American market share in 2019 and has rebounded well since coming out of the Covid pandemic.
Their primary equipment focus is construction and industrial equipment such as trucks, forklifts, compressors, and more with a fleet that consists of more than 660,000 rental units.
United Rentals primarily focuses on general and aerial rentals. However, they also offer power & HVAC units, tool solutions, fluid solutions, and more.
The company operates across 49 US states, 10 Canadian provinces, 4 European countries, and Puerto Rico.
The company has a current market capitalization of $22 billion and comes in with a beta value of 2.05. This means that United Rentals is more than twice as volatile as the general market.
Despite its volatile nature, the company has fared well in 2020 and beyond. United Rentals now has a share price of over $305.
The future looks solid for investors with holdings in United Rentals considering there’s no disruptive tech or competitor in this space.
SVB Financial Group (NASDAQ: SIVB)
Headquartered in California, SVB Financial Group has a number of well-known subsidiaries, including Silicon Valley Bank. This bank has helped to fund over 30,000 startups and is one of the largest banks in the US.
Interestingly enough, the bank is also one of the largest financial service providers to Napa Valley wine producers.
Between their many subsidiaries, SVB Financial offers asset management, brokerage and investment services, fund management services, and more.
With a market cap of $29.94 billion and a beta value of 2.04, SVB is right in line with United Rentals.
SVB has really found its stride in 2021, reaching an all-time high in May and holding strong at around $500 per share.
Investors may want to watch and wait for a drop in price before investing, but SVB Financial Group will continue to fund some of the world’s largest tech companies and most exciting startups in Silicon Valley.
High Beta Tech Stocks
Advanced Micro Devices, Inc. (NASDAQ: AMD)
Advanced Micro Devices is the first of two American semiconductor companies on our beta stocks list.
The company develops computer processors and other related technologies, including motherboard chipsets, microprocessors, and graphics processors.
Their products are used in workstations, personal computers, servers, and embedded system applications.
Advanced Micro Devices has a rather large market cap of $103.9 billion and are still traded for an impressively low price of just over $85 per share.
This beta stock saw a huge increase in August of 2020 and although it’s leveled out some, it’s still a good beta stock to look at with a score of 2.05.
As more of our life becomes reliant upon digital technologies, companies like Advanced Micro Devices will be critical in providing the next generation of digital infrastructure.
Lam Research Corporation (NASDAQ: LRCX)
Lam Research Corporation is another leading semiconductor company. The business is based out of Silicon Valley and was founded in 1980.
After Tesla, Lam Research is the second largest manufacturer in the Bay Area.
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The company designs, manufactures and markets semiconductor processing units, which make integrated circuits. Their products are also used in wafer fabrication equipment.
The company holds a market cap of $84.4 billion and has a stock price of over $590.
With a beta score of 1.28, it’s is higher than the S&P500 average. This makes it a good selection for the relatively conservative investor.
The company reached its highest trading price in history in April 2021 and is staying strong. Now could be a great time to invest while beta valuation is low.
Align Technology, Inc. (NASDAQ: ALGN)
Align Technology manufactures 3D digital scanners and clear aligners for orthodontics.
Notably, the company is the manufacturer of Invisalign, one of the most popular clear teeth aligner systems in the world. This product alone has more than 9 million users worldwide.
Align Technology also produces iTero which is a mouth scanner for dental practices. Both of these tools have been very successful for the company and have been reflected in their stock performance.
It currently has a market capitalization of $47.53 billion and makes this high beta stock list with a value of 1.69.
Orthodontic care is an essential part of dentistry, which means there will be continued demand for the company’s services for many years to come.
As with many high beta stocks on this list, Align Technology saw a nice jump in share price in the middle of 2020. Performance is going strong with a current price of $600 per share.
High Beta Mining Stocks
Freeport-McMoRan Inc (NYSE: FCX)
Freeport-McMoRan is a mining company based in Arizona. The company previously had ties to the oil industry but has since moved solely into mining.
Freeport is now the world’s largest producer of molybdenum and one of the largest producers of copper. In 2019, copper accounted for 79% of the company’s sales.
Freeport has operations across 5 regions, including North and South America, Africa, Europe, and Indonesia.
This great regional diversification helps to mitigate some of the regulations of environmental protection agencies.
That said, the company has been involved in a number of environmental, human rights, and corruption scandals over the years.
The company has a market cap of $48.3 billion with a current share price of around $33.
Freeport has a beta index score of 2.14, making it a great choice for aggressive investors.
The company’s decision to move out of the oil industry has only benefitted them in the long run.
High Beta Retail Stocks
L Brands Inc (NYSE: LB)
Formerly known as Limited Brands, Inc., L Brands is an American fashion retailer.
Based out of Ohio, the company’s flagship brands include Bath & Body Works, Victoria’s Secret, and Pink.
The company made plans to sell the Victoria’s Secret portion of the business to a private equity firm but the sale never came to pass.
As a likely result, the CEO was replaced in May of 2020.
As of summer 2021, it sounds as if L Brands is simply going to spin off Victoria’s Secret instead of looking to sell the brand.
L Brands has a market cap of $19.4 billion with shares of L Brands currently trading for over $70 per share.
The company has a beta index score of 1.78, marking it as fairly volatile in comparison to the rest of the overall market.
With eCommerce becoming an increasingly important aspect of our lives, L Brands’ brands will likely continue to perform well.
After 5 years of decline, the last year has seen huge a significant share price increase for the company.
Current conditions suggest investors are enthusiastic about the changes the company has made with ownership of the Victoria’s Secret brand.
Share prices are currently at their highest point in six years.
YETI Holdings, Inc. (NYSE: YETI)
YETI Holdings, Inc. is an American company based in Austin, Texas, and sells products like coolers and insulated drinkware.
The company got its start in 2006 after two brothers decided the current insulated products on the market just weren’t up to snuff.
Although starting with coolers, YETI has recently branched out into other insulated accessories to appeal to a wider range of people
A relatively new company, YETI’s market cap is listed at $7.83 billion and has been trending upwards for years. It sits close to $90 per share at the moment but new innovations will likely see it continue to increase.
The beta value of 2.64 demonstrates a large amount of volatility but all signs point to the company continuing to grow as time rolls on.
All signs point to the company currently being undervalued for the success it has had.
High Beta Automotive Stocks
Polaris Inc. (NYSE: PII)
Polaris Inc. is an American company that has been in business for over 65 years in the power sport vehicle space. Manufacturing one of the first snowmobiles, the company has since branched into all-terrain vehicles, motorcycles, and more.
In May of 2021, interim CEO Mike Speetzen was promoted to the role permanently and looks to push Polaris into a broader customer demographic.
Polaris saw its all-time highest stock price in April 2021 and is holding strong at around $130 per share in spite of the corporate restructuring. The market cap is a commendable $8.11 billion.
Changes point to market volatility, and Polaris currently has a 2.02 for its beta score. That being said, the company’s push towards brand awareness and more diversity show potential for long-term profits.
Should You Buy High Beta Stocks?
High beta stocks come with high risks, but they also have a huge potential for reward.
Not all high beta stocks are created equal, so it’s important to do your research before making any investment decisions.
With high beta stocks with a rating of 1.0+, the higher you go from 1, the more volatile the stock becomes.
Volatility often comes with huge returns, but it can also set you up for huge losses.
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High Beta Stocks: Final Thoughts
High beta stocks have huge potential, but they also come with plenty of risk.
Investors should do their research before buying high beta stocks.
Some industries are inherently volatile, which reflects in the stock market performance of these companies.
It’s also common for stocks to experience volatility if they’ve struggled with public controversies or have had multiple acquisitions in a short period of time.
It can be difficult to figure out exactly why a stock is volatile.
However, these stocks can be great for investors with a high risk tolerance, as they come with huge potential for returns.
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