Key Points
- As the VIX gets lower in this cycle, investors could scramble to find a place for higher returns around the sleepy stock market.
- Characterized by a high beta, these stocks offer the technical foundation of a more 'exciting' ride for those who need to see a potentially green quarter.
- Analysts like them, as their price targets and EPS projections show.
- 5 stocks we like better than PulteGroup
Every once in a while, the market's volatility index (the VIX) goes to an extreme. Whether to the upside or downside, these significant swings bring about massive opportunities for investors who know how to ride the market's volatility cycle. Today, the VIX sits between 11.5% and 13.0%, levels not seen before the COVID-19 pandemic.
Knowing how little volatility there is today, investors have to improvise new ways to pump up returns within their portfolios since there are no profits without volatility. This is where a savvy eye comes into play. Today, your eye should look to land on high beta stocks. This group is characterized by having more significant moves – on average – compared to the S&P 500, so a high beta is desirable when the market isn't moving much.
Investors shouldn't lose track of other fundamentals that matter within this list. Starting from high beta and finishing with other attractive factors, stocks like Dutch Bros Inc. NYSE: BROS, Wayfair Inc. NYSE: W, and even RH NYSE: RH could potentially make it into the watchlist of those investors – and traders – looking for a volatility fix.
Smart Money Landed on Dutch Bros Stock
$35.39 -0.29 (-0.81%) (As of 05/31/2024 08:50 PM ET)
- 52-Week Range
- $22.67
▼
$38.41 - P/E Ratio
- 196.62
- Price Target
- $37.33
After boosting its stake in Dutch Bros stock by 35% over the past quarter, the Vanguard Group now has $211.6 million running for the stock to deliver some upside through this sleepy stock market.
Like analysts at Wedbush, those in charge of valuing stocks for a living saw it fit to place a $45 price target on Duch Bros stock. Calling for a 25.3% upside from where the stock trades today is a sort of 'congratulations' for those asset managers at Vanguard; here's where returns could come from.
A beta of 2.4 brings Dutch Bros stock into the upper end of volatility. Now, investors have to determine if this volatility will be upside or downside and whether these analyst targets are correct.
With an expected 24.1% earnings per share (EPS) growth in the next 12 months, investors can consider the company's above-average growth rate when making a decision on BROS. Markets offer another angle to build a bullish case for this stock.
With a massive 201.6x P/E, Dutch Bros trades at nearly 10 times the 22.1x P/E at which Starbucks Co. NASDAQ: SBUX trades today. Stocks typically trade at these sorts of premiums for a reason, and markets are still willing to pay this premium for Dutch Bros high beta.
Analysts bid the stock up to 94% of its 52-week high, another sign of market optimism toward its future. Compared to Starbucks, which fell to 75% of its 52-week high, the technical factors and fundamentals favor BROS stock.
A Real Estate Boom is The Least of Wayfair's and RH's Problems
Warren Buffett spotted the massive wave in the U.S. real estate sector that will come shortly. He started buying at the top of the value chain, choosing construction stocks like D.R. Horton Inc. NYSE: DHI and PulteGroup Inc. NYSE: PHM, as he started buying in the fourth quarter of 2023.
According to the Intercontinental Exchange, most mortgages in the U.S. carry an average interest rate of 3.25%, so homeowners aren't excited to sell their homes just to look for a new one at a 7.3% rate today.
More than that, the average home price has risen by 32% since the pandemic, so would-be homebuyers must deal with not only a more expensive home but also twice as expensive mortgage rates.
Knowing that a new flux of inventory could hit the residential sector, investors flocked to stocks like Wayfair. Morgan Stanley analysts slapped a $90 price target on the stock, daring it to rally by as much as 45% from where it trades today.
RH didn't fall too far from the Wayfair tree, as Wells Fargo analysts liked it enough to announce a $360 price tag. This target would need RH stock to jump by 40.5% from today's price to prove analysts right.
Now, with a beta of 3.3, Wayfair stock could set investors up for a wild ride to – hopefully – the upside. So far, analysts agree through price targets and their over 100% EPS growth projections for the stock.
Even though RH's beta is lower than Wayfair's, at only 2.5, it's still considered high enough to deliver some excitement. Analysts now project up to 71.4% EPS growth for the company in 2024.
Before you consider PulteGroup, you'll want to hear this.
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