Trivariate Research has a unique investing method built around volatility that it says is better for sorting stocks. The firm evaluates for what it calls “company-specific risk,” or CSR. That’s different than the more popular residual volatility method, Trivariate founder and former Morgan Stanley chief U.S. equity strategist Adam Parker said. The big difference: Residual volatility looks at the standard deviation of the residual estimated through a seven-factor model over a year. CSR takes residual volatility one step further, adjusting it for the total volatility of daily stock returns over the same time period. Parker found that residual volatility has shown “limited efficacy” over the past 15 years. On the other hand, CSR has successfully separated the winners from losers since 2021, he said. CSR tends to be most predictive of success in small- and micro cap stocks and among those lower in quality, said Parker. With that in mind, Trivariate listed long ideas that are either small- or mid-cap and that are in the bottom half of the quality spectrum. Here’s 10 that made the list: Sports streamer FuboTV was one of Parker’s long ideas. The stock has surged 86% since the start of 2023, but still trades at only about one-ninth its price at the end of 2020. The majority of analysts hold a buy rating on the stock, according to FactSet. The average price target implies shares could add nearly 20% over the next year, which would still leave it selling for just a fraction of where it once traded. Cantor Fitzgerald analyst Brett Knoblauch came out as more bullish on Tuesday, initiating coverage of fubotv with an overweight rating and a $5 price target, implying upside of about 55% for the stock. “FUBO, in our view, is one of the best pure-play ways to play cord-cutting and the associated shift of advertising dollars away from linear TV and to connected-TV (CTV),” he wrote in a note to clients. FUBO 5Y mountain FuboTV shares, 5-year Ride-hailing provider Lyft is a better-known stock on the Trivariate list. The stock has outperformed in 2023, gaining nearly 27% since the start of the year, after collapsing 74% in 2022. But Wall Street sees a correction ahead. The typical analyst has a hold rating and target price implying shares could slide about 15% in the next 12 months, according to FactSet. Elsewhere, Parker pointed to entertainment and dining stock Dave & Buster’s . Shares are up 31% this year, far surpassing the 21% gain in the S & P 500. The average analyst rates Dave & Buster’s a buy rating, with an average price target reflecting the potential for another 15% gain. Dave & Buster’s last week reported a smaller third quarter loss per share on a GAAP basis than analysts had estimated, and said it had bought back $100 million worth of shares in the quarter. But the Dallas-based company missed Wall Street consensus estimates for both revenue and EBITDA in the quarter. — CNBC’s Michael Bloom contributed to this report
