We recently compiled a list of the 10 Most Volatile Stocks Under $3 For Day Trading. In this article, we are going to take a look at where Pacific Biosciences of California, Inc. (NASDAQ:PACB) stands against the pump and dump stocks.

Day trading involves buying and selling stocks within a single trading day to capitalize on short-term price movements. Volatile stocks are often preferred for their frequent price swings, creating opportunities for quick profits. Equity beta, which measures the sensitivity of a stock’s return to market changes, is a key metric often used by investors for gauging volatility. Day traders close their positions by the end of the trading day to avoid the risks associated with holding overnight, such as unexpected market events, earnings announcements, or global developments that can drastically impact stock prices before the next trading session begins. While penny stocks, particularly those priced under $3.00 per share, are appealing due to their low entry cost and potential for rapid gains, they also carry heightened risks like low liquidity and susceptibility to manipulation. The key takeaway for readers is that these trades shall be approached with cautiousness and a clear strategy with risk management in place.

READ ALSO: 10 Best Stocks For Day Trading

Stocks under $3.00 offer a distinct advantage in that they typically operate below the radar of hedge funds, which prioritize larger, more liquid investments to accommodate their substantial capital and complex strategies. Hedge funds, the most informed and skilled investors, leverage extensive resources, market expertise, and advanced analytics to gain a competitive edge. Their absence in the penny stock space leaves more room for retail investors to seize opportunities without competing against institutional investors’ sophisticated tactics. This lack of institutional interest can create less efficient pricing, offering well-researched retail traders the potential to identify undervalued stocks and profit from short-term volatility via day trading.

Short-term trading strategies become more attractive during times of macroeconomic uncertainty, which can further fuel volatility and create opportunities for swing trading. The main volatility index in the US market still remains elevated vs. its moving average as investors have a hard time digesting the tariffs situation and the abrupt cuts in federal workforce and spending. Bond yields are reluctant to price in lower rates in the future – despite odds of an economic recession rising substantially if compared to the beginning of the year, the potentially accelerating inflation, as fueled by tariffs, will likely keep rates high. Regardless of what happens, it is clear that Trump 2.0 gives investors plenty of anxiety – many have been actively seeking cheaper investments abroad, particularly in Europe, which has caused the US stock market to relatively underperform the rest of the world.

Small-cap stocks are usually the most affected during periods of heightened volatility. The good news is that the Bull-Bear Ratio compiled by Investors Intelligence fell to 1.3 during the past week, which, from a contrarian perspective, is a bullish signal. This means that pockets of opportunity might soon return to the penny stocks category, both for long-term investors and day traders. Despite short-term fears and uncertainty, the fundamentals of the US stock market remain solid, with future earnings estimates staying strong and potentially seeing an uplift from tax cuts later this year or next. We suggest considering stocks with a high equity beta, above 2.0, as this category will likely outperform in a rising market.

A molecular biologist, carefully studying the reagents under a microscope.

Our Methodology

We used Finviz to filter companies with a share price under $3.00 and that have an equity beta above 2.0. Then we compared the list with Insider Monkey’s proprietary database of hedge funds’ holdings as of Q4 2024 and included in the article the top 10 stocks with the highest hedge fund ownership.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).

Pacific Biosciences of California, Inc. (NASDAQ:PACB)

Number of Hedge Fund Holders: 17

Pacific Biosciences of California, Inc. (NASDAQ:PACB) is a biotechnology company specializing in advanced DNA sequencing technologies. It develops and sells long-read and high-throughput sequencing systems used for genomics research, clinical applications, and agricultural biology. Its proprietary HiFi sequencing technology enables high accuracy in detecting genetic variations, structural variants, and epigenetic modifications. The company serves academic institutions, government agencies, pharmaceutical companies, and clinical researchers. Revenue is generated through instrument sales, consumables, and service contracts. PACB’s sequencing solutions are used in applications such as rare disease research, cancer genomics, and microbial and plant genome analysis. The California-based company ranked ninth on our recent list of Top 11 CRISPR Stocks to Invest In.

In Q4 2024, Pacific Biosciences of California, Inc. (NASDAQ:PACB) achieved $39.2 million in revenue, primarily driven by shipments of 23 Revio systems and 7 Vega platforms. Over the course of the year, the company reported $154 million in total revenue, supported by the delivery of 97 Revio systems, of which approximately 45% went to new customers of PacBio instruments. The company also recorded impressive growth in its HiFi sequencing technology, with genomic data output increasing by 81% in 2024. Additionally, consumable revenue rose by 11% YoY to $70.4 million.

As Pacific Biosciences of California, Inc. (NASDAQ:PACB) looks ahead to 2025, revenue is anticipated to range between $155 million and $170 million, reflecting a 6% increase at the midpoint despite challenges from ongoing macroeconomic pressures and uncertainty regarding NIH funding. The company has significantly improved operational efficiency, reducing annual non-GAAP operating expenses by over $75 million and cutting the COGS for Revio systems and consumables by 16% and 22%, respectively. With nearly 15% of 2024 revenues derived from LDT labs or children’s hospitals, the clinical strategy appears promising. Furthermore, management aims to turn the company’s cash flow positive by the end of 2027, supported by $390 million in cash and investments, comfortably surpassing its first debt maturity in August 2029. With an equity beta of 2.01, PACB is one of the most volatile stocks under $3 for day trading.

Overall PACB ranks 5th on our list of the most volatile stocks under $3 for day trading. While we acknowledge the potential of PACB as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PACB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.