As many growth-oriented names have experienced solid recoveries so far in 2023, you may be on the lookout for growth stocks to watch.
But while there are plenty of trending stocks with exposure to high-growth industries like artificial intelligence () and electric vehicles ( ), which of these names are in the “Green Zone”?
TradeSmith offers investors valuable tools for determining which stocks to watch. A good example is its Health Indicator feature. This comprehensive indicator provides an overall rating of a stock’s current health.
Using this metric, you can quickly find potential opportunities to explore. Broken down into three “zones” (green, yellow, and red), you’ll have a general idea about whether it’s best to be bullish, bearish, or neutral on a particular stock.
As you may have guessed, stocks in the “Green Zone” are performing well, with little indication that the trend is on the verge of shifting.
A stock in the “Yellow Zone” has corrected by more than 50% of its volatility quotient (VQ), a proprietary TradeSmith metric that helps measure a stock’s risk. When a stock in your portfolio goes from green to yellow, it may be a good time to reassess whether to maintain the position.
Stocks entering the “Red Zone” have corrected by more than their calculated volatility quotient. VQ can be useful when adding stop losses to your positions. View any move into the “Red Zone” as a warning sign to exit your position for now.
These three growth stocks to watch are currently in the “Green Zone.”
Nvidia (NASDAQ:NVDA) has been in the “Green Zone” for over six months. As you likely know, thanks to the chip designer’s high exposure to the generative AI megatrend, shares have been on a tear since the start of 2023, more than tripling in price.
Although NVDA stock pulled back in September, so far in October the AI chip play has been surging higher again. Near-term worries about interest rates and recession risks have fallen onto the back burner as focus shifts back to Nvidia’s long-term growth potential.
A first mover in this fast-growing space, Nvidia continues to dominate the AI chip market. There are also signs that demand for Nvidia’s non-AI chips is starting to recover. Put it all together, and it makes sense that shares continue to be in the “Green Zone.” TradeSmith’s volatility quotient for NVDA is 44.9%, which makes it a high-risk stock.
Rivian Automotive (RIVN)
Rivian Automotive (NASDAQ:RIVN) has been in the green zone for over three months. With this, consider it still one of the growth stocks to watch, even as shareholder dilution concerns have creeped back up recently.
On Oct. 5, RIVN stock tumbled by nearly 23%, following the EV maker’s announced plans to raise an additional $1.5 billion in capital through the sale of convertible bonds. Wall Street was also disappointed with Rivian’s latest updates to Q3 revenue guidance. This latest news may represent the latest hiccup for Rivian, but better news may arrive in the coming quarters.
For instance, the company may hit positive gross margins, which is expected to happen sometime in 2024. Also, as UBS analyst Joseph Spak recently argued, Rivian could raise its full-year production guidance at its upcoming earnings release next month. TradeSmith’s volatility quotient for RIVN is 68.8%, which makes it a sky-high-risk stock.
SoFi Technologies (SOFI)
SoFi Technologies (NASDAQ:SOFI) is a new entrant into the “Green Zone,” having entered it six days ago. After pulling back in September, shares have been bouncing back so far in October. This is not surprising, given that there’s an event on the horizon that could really give the stock a boost.
That is, this neobank/fintech is scheduled to report earnings on Oct. 30. Analysts have walked back earnings expectations in recent months, but the market may decide to focus on revenue growth and future guidance, and not so much on SoFi’s reported net losses for Q3.
If this digital-first financial institution once again reports strong revenue growth and reiterates prior guidance calling for positive GAAP earnings starting in Q4 2023, SOFI stock could experience a post-earnings surge, like it did following the Q2 earnings release. TradeSmith’s volatility quotient for SOFI is 56.44%, which makes it a risky stock.
The TradeSmith Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.