The stock market has been rough for volatile growth stocks in 2022. Investments viewed as high-risk ideas due to limited earnings or heavy reliance on debt financing have taken a beating this year, often losing more than half of their market value.
The same volatile tendency also set up the same group of stocks to outperform the broader market on a good day, even if the companies don't have any clear reason of their own to skyrocket that day.
These trends continued to play out on Friday. Surprisingly pleasant reports on inflation and shortened COVID-19 quarantines for travelers to China started a marketwide rally on Thursday, and the good times kept rolling on Friday. That was all it took to push many growth stocks higher by double-digit percentages.
For example, computer hardware retailer Newegg Commerce (NEGG 5.61%) was up by 13.6% at 2:40 p.m. ET. Gaming platform developer Unity Software (U -1.40%) had gained 17.9% at the same time. Cloud-based communications expert Bandwidth (BAND 0.73%) fared even better, rising all the way to 25.2%.
The three stocks listed above have a few things in common:
- Their share prices saw double-digit percentage gains on Friday.
- Even so, all three stocks are still trading at least 70% lower in 2022.
- Their biggest news on Friday consisted of chirping crickets. Tumbleweed in the desert. The great void. (You know what I mean.) There were no earnings reports behind these moves (though we are in the back half of an earnings season), no game-changing product launches or service announcements, no analyst upgrades.
The names I picked have one more thing in common. All three are high-quality businesses with robust financial results and bright futures. Today's no-news gains make more sense to me than the brutal price cuts they have seen earlier this year.
Unity recently completed a long-winded merger with app monetization expert IronSource, setting the combined company up to deliver broader revenue streams from Unity-based games and apps.
Cloud communications are disrupting the traditional telecom space, and Bandwidth offers additional value through its communication-focused programming tools for app developers.
Newegg is the biggest name in computer hardware in the e-commerce space, giving mighty Amazon a run for its money in that crucial market.
There's a lot to love in this little group of volatile stocks. Friday's action shows that they can beat the market on no news at all, after being spring-loaded for a rebound all year long.
Now imagine what these tickers might do when the underlying companies actually have good news to share, preferably in a healthier economy. This looks like a trio of robust growth-stock investments for the long haul.