These 5 stocks are strictly for the bulls

If you think the S&P is primed to bounce, you might want to take a look at high-beta stocks.

These are the names that tend to track the S&P most excitedly — climbing the most when the market rises and falling the furthest when the market skids.

Given that stocks as a whole have suffered this year, it's little surprise that these high-beta stocks have had an especially rough go of it.

Dividing all of the stocks in the S&P 1500 with market values above $500 million into quintiles based on their beta measures, one finds that the average 2016 performance for the highest-beta stocks is a 13.7 percent drop. Meanwhile, the average stock in the lowest-beta quintile of the market is up 1.2 percent, based on a CNBC analysis of figures from FactSet.

That implies that if one believes stocks are primed to bounce, an effective way to bet on more upside would be to buy some of the highest-beta-names out there. These includes stocks like TripAdvisor, Barnes & Noble and WisdomTree Investments.

2016 Performance
Beta (3-year)
Lannett -37.1% 3.3
Wisdomtree Investments -26.2% 3.2
TripAdvisor -28.8% 3.1
Scientific Games -32.9% 2.9
Barnes & Noble 2.5% 2.8

For Eddy Elfenbein, editor of the Crossing Wall Street blog, TripAdvisor stands out as an especially alluring pick. Shares of the online travel company have already slid 30 percent in 2016.

"When the economy and consumer spending is recovering, you see even more money go to travel," Elfenbein said Tuesday on CNBC's "Trading Nation." "I think there is a macro play for a company like TripAdvisor that can really see a nice gain — and it has not done well over the past few months."

Another high-beta name that should benefit from a strengthening stock market is ETF provider WisdomTree, according to Stacey Gilbert of Susquehanna. She says that in 2016's anxious investing environment, investors have been moving billions of dollars from equity ETFs into fixed income and commodities — but a return of funds into equity ETFs would also help the company's stock.

"If this market were to take off, and it was back to risk on, game on, [with] everyone excited and getting involved, typically we would expect investors to move back into those equity ETFs," Gilbert said Tuesday on "Trading Nation."

However, Gilbert noted that based on options market activity, investors are not yet bullish on high-beta stocks.

"There's really not a lot of investor speculation that any of these names is going to make a huge recovery," she said.

Indeed, if these are stocks for the more bullish investors to rush into, they are also stocks for the more cautious to avoid assiduously. As the beginning of this year has shown, high-beta stocks can fall forcefully in a market rout.

After all, in addition to tracking the market more closely, they are also more volatile — given that calculating the beta for a stock partially entails multiplying a stock's correlation with the market by that stock's variation of returns.

Disclosure: Gilbert's firm is a market maker in the securities of WisdomTree; Elfenbein has no holdings in TripAdvisor.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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