Are you an investor seeking to maximize returns within your set constraints? If so, you’re in the right place. Alpha, a key metric in finance, measures the performance of an investment against a benchmark index like the S&P 500. In this article, we delve deep into the concept of alpha, provide an illustrative example, and reveal the top 10 high alpha stocks from the Sure Analysis Research Database.
What Is Alpha?
- Alpha as a metric compares an investment’s performance to a relevant index, typically the S&P 500.
- A positive alpha indicates outperformance, while a negative alpha signifies underperformance.
- Other metrics like Beta and the Capital Asset Pricing Model (CAPM) play a role in determining expected returns.
Calculation of Alpha:
To calculate alpha, use this formula:
Alpha = (Portfolio return – Risk-free rate) – Beta of the investment x (Expected return of market)
For example, consider a portfolio with a total return of 20% over a specified period and a Beta value of 1.1. The alpha would be 9.65%.
The Top 10 High Alpha Stocks:
- Autoliv Inc. (ALV)
- Industry leader in auto safety equipment
- Strong financials despite sales decline
- Carters Inc. (CRI)
- Leading retailer in children’s apparel
- Decline in net sales due to pricing and marketing investments
- Virtus Investment Partners Inc. (VRTS)
- Boutique investment firm with diverse strategies
- AUM fell due to net outflows, but EPS rose
- Shoe Carnival Inc. (SCVL)
- Specializes in family footwear retail
- Quarterly performance driven by Back-to-School sales
- Hyster Yale Inc. (HY)
- Materials handling company with diversified revenue streams
- Operating profit decline due to cost pressures and lower volumes
- ASML Holding NV (ASML)
- Leading chip-making equipment manufacturer
- Strong revenue growth and optimistic sales guidance
- Alphabet Inc. (GOOG)(GOOGL)
- Technology conglomerate with diverse business segments
- Revenue growth across major business segments
- Shutterstock, Inc. (SSTK)
- Creative content provider merging with Getty Images
- Quarterly revenue growth and dividend increase
- AES Corp. (AES)
- Energy company with strong renewable energy portfolio
- Impressive adjusted EPS performance despite slight decline
- Eli Lilly & Co. (LLY)
- Pharmaceutical giant with significant revenue growth
- Exceptional financial performance in revenue and EPS
In conclusion, the pursuit of high alpha stocks can lead to significant outperformance. If you’re seeking investment opportunities with the potential for superior returns, consider exploring the high alpha stocks highlighted in this article. Happy investing!
