Hot High Potential Stocks Gain Power In This High Beta Game Surpasses The Market
Investors hoping to beat the broad market might turn to funds that hold hot stocks that are riskier but could generate higher returns.
Invesco S&P 500 High Beta ETF (SPHB) is one of those candidates. The $ 2.1 billion fund is up almost 34% this year, more than double the 15% return of the S&P 500. And it has also beaten the benchmark in the past three and five. years.
SPHB, which celebrated its 10th anniversary last month, tracks the S&P 500 High Beta Index. The index includes the 100 stocks of the S&P 500 “with the greatest sensitivity to market movements, or beta, over the past 12 months,” according to the Invesco website. The fund and the index are rebalanced and replenished four times a year.
Beta is a way to measure the volatility of a stock relative to the overall market. So a stock with a beta greater than 1.0 tends to move more than the market over time. As a result, high beta stocks are considered riskier, but have the potential to generate higher returns.
Information technologies represented the largest sector weight with nearly 21% of the workforce. Financials, consumer discretionary and energy were next with around 19% each, followed by 9% in industrials and 7% in real estate. Materials, communications services and healthcare made up the remainder.
Energy among hot stocks
Western Oil (OXY) has jumped nearly 90% this year as oil prices and demand rise. The company’s low rating of 20 earnings per share reflects a loss in 2020. But a relative strength rating of 93 places Occidental in the top 7% of all stocks. The shares are extended from a point of purchase of 30.15 of a cup with handle.
Diamondback EnergeticsYes (CROC), also in the top 10, is trading at its highest level in almost two years. It has well passed the purchase point of 87.69 for a handlebar mug, according to Smith Market graphical analysis. A composite rating of 98 places it among the hottest stocks in the US oil exploration group.
Solar energy technology stock Enphase Energy (ENPH) leads IBD’s solar group with a composite rating of 94. The company rebounded from two quarters of stable earnings and revenues to lower revenues and revenues with profits and sales from 26% to 47% in T4 and T1. Enphase, up 4% this year, spent most of 2021 consolidating.
Tesla, cruising stocks in the mix
Another notable hot stock in the top 10 is You’re here (TSLA), which is expected to announce second quarter deliveries shortly. Tesla stock is trading closely after breaking through a trendline that established an aggressive buy point near 675. It is also shaping the right side of a base. The electric vehicle giant is a IBD Ranking Stock.
Caesars Entertainment (CZH), MGM Resorts (MGM), Norwegian Cruise Line (NCLH) and Royal Caribbean Cruises (RCL) are also in the top 10. Leisure stocks have rebounded as Covid-19 cases decline in the United States
The Invesco ETF found support along its 10-week moving average after breaking through the buy point of 72.74 on a flat base in late April. This offers a chance for investors to buy or add stocks. SPHB charges an expense ratio of 0.25%.
The average annual returns of the ETF over the past three and five years are 23.1% and 23%, according to Morningstar Inc. The SPDR S&P 500 Trust (TO SPY) is up 18.5% and 17.5% for the same periods.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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