Traders often seek stocks that swing widely against the broader market to maximize their profits. While this is more risky should the markets retreat, these "high beta" stocks are regularly sought by day and swing traders, who play them on both the long and short side.
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For the uninitiated, "beta" is the investment term used to describe a stock's volatility with respect to the overall market. A beta of "1" indicates a stock that moves up and down in line with the broad market. A beta of 0.5 indicates a stock that moves precisely half as much as the market. So, for example, if the S&P 500 were up 4% on a given day, a 0.5 beta stock would be expected to rise by 2%. A 1.5 beta stock would move 6%.
Following are high beta stocks that also have the benefit of above-average dividend yields - a feature that should cushion them on the downside in the event of a broad market decline.
Ups And Downs Of Apartment Hunting
Primedia (NYSE: PRM) publishes online and printed home-buying and apartment-hunting guides. The stock pays a 9.8% annual dividend and trades with a price/earnings ratio (P/E) of just 5. Primedia's beta comes in at a hefty 2.03. The shares are up close to 300% in the last year.
Deluxe Corp. (NYSE: DLX) stock doubled over the course of the year and still trades with a 2.27 beta. The shares have a 7.2 P/E and offer investors 7.2% annually.
Deluxe prints checks, business cards and forms for small businesses, financial institutions and other corporate clients.
Precision Drilling Trust (NYSE: PDS) is another pendulum of a stock with a 2.34 beta and a 250% rise so far this year. PDS has a P/E of 4.9 times last year's earnings and offers a 6.5% annual yield. The company digs holes in the ground and provides a full array of camp services, including canteen and wastewater, for oil and gas companies operating in Canada, the U.S., Mexico and Chile.
Set Sail For Beta Heaven
Star Bulk Carriers (Nasdaq: SBLK) owns and operates a shipping fleet that carries dry bulk commodities such as metals and grains worldwide. The company's stock pays an annual 5.9% dividend and trades with a multiple of 1.9 times last year's earnings. More impressive for traders, though, is the 2.79 beta that's fixed to the stock. Stormy seas, indeed!
Universal Insurance Holdings (AMEX: UVE) and its subsidiaries provide homeowner insurance. The stock trades with a 7 P/E and a 13% dividend yield. Beta on UVE is a whopping 3.90.
Stocks that move are a trader's dream. But these issues have the added advantage of low P/Es and high dividend yields. Value investors might also be interested in that kind of volatility. (To learn more, see Beta: Know The Risk.)
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