March 16, 2011 PSW Staff |
are consistently in ping-pong mode. These issues see more than 5000 trades per day and exhibit plenty of volatility. These stocks are not safe long-term bets by any means, but short-term traders may find enormous opportunity. Even without margin or the use of options, this small group of stocks offer short-term percentage swings in excess of five percent. The stocks tend to mirror the broad indices with respect to direction, and right now, the trend is up, giving long oriented traders some cushioning. The basket includes small to large-cap stocks from a diverse group of sectors. SIRIUS XM Radio Inc. (SIRI) Being the most recognizable name in the group, Sirius offers more liquidity than any penny stock in history. The stock consistently sees in excess of $100 million exchange hands on any given day and has done so for many years now. The stock has, in the past, gone through periods of low volatility and slow consolidation phases. Over the past six months, however, volatility has returned to the stock giving it a beta of 2.24, more than twice as much volatility as the overall stock market. Sirius now trades like a giant ship navigating turbulent waters, with a float of nearly four billion shares. Almost three billion dollars in revenue last year with quarter over quarter growth near 9% means that Sirius has the goods to back up such a high share count, despite some serious valuation concerns. Expect split second executions on any reasonably sized trade in this stock at any time. Level 3 Communications Inc. (LVLT) This stock is the least volatile of the bunch with a beta of 1.53 but, like Sirius, offers plenty of liquidity and quick executions. The stock averages about 15,000 trades and $30 million in dollar volume per day. At $2.28 billion dollars, Level 3's market cap is about a quarter of what Sirius' is, but the company brings in more revenue and has a smaller share count, approaching 2 billion. One thing that could add to the volatility of this stock in the near future in the percentage of shares held short right now, which is at 12%. Keep in mind that despite some positive movement in the stock over the past few months, it has flirted with going below a dollar over the past two years. During this time, the stock has traded as low as $0.62 and as high as $1.70, a pretty nice band that channeling traders may find intriguing. Flagstar Bancorp Inc. (FBC) Flagstar is one of a handful of bank stocks trading below $2.00 that is not a bankruptcy issue. The stock offers volatility with a beta of 1.9, and over the past five months, has shown immense liquidity as well. The company is currently worth around a billion dollars and has half a billion shares outstanding. The float, however, is significantly less at 200 million due to large institutional interest. Activity has started to settle a little bit in the stock over the past month, but the float being where it is should keep the volatility strong while still allowing for quick executions for some time to come. Rite Aid Corp. (RAD) Shares of Rite Aid have started off the year with positive momentum and high volatility. The stock sports the highest beta in this list at 2.57, and trading activity is on par with Flagstar and Level 3, only it is climbing, not shrinking. With close to 10,000 trades per day, a billion dollar market cap, and $25 billion in annual revenue, Rite Aid is certainly a rare penny stock. In this group, Rite Aid may have the most risk, as the beta also implies. The stock spent most of last year below a dollar fighting to stay listed. FuelCell Energy Inc. (FCEL) FuelCell Energy is a tiny company with an extraordinarily large following. The stock has a float of less than 100 million shares and sees well over 5000 trades per day. Price action has generally been positive for the last nine months, and volume is increasing as well. The stock fell pretty hard prior to that, but managed to stay above a dollar all last year, even getting above two dollars around Christmas time. Fast executions are no problem in this stock even after hours. All of this plus a beta at 2.03 make FCEL a favorite among active traders. Capstone Turbine Corp. (CPST) Capstone is essentially a mid cap trading in a small caps body that also does north of 5000 trades per day. The stock was below a dollar for several months last year, but since December, positive price action, increasing volume and more volatility have been the norm. With 250 million shares outstanding, a market cap of $400 million, and the price where it is, one can see how the capitalization status of this company could change quickly. Also adding to the volatility is the fact that 29 million shares are held short, or almost 18% of the float. This article continues for subscribers and includes specific short term trading ideas for these stocks. Members also gain access to our portfolio and exclusive articles. Get started for free by entering your email below. Remember, we are completely un-biased. |
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