The recent surge in high-beta stocks, including those in Jim Cramer‘s ‘PARC’ acronym, has raised concerns among analysts. JPMorgan‘s strategist, Dubravko Lakos-Bujas, has issued a warning about the potential risks associated with this trend.
What Happened: The “PARC” stocks, a term coined by Cramer, are Palantir Technologies Inc. (NYSE:PLTR), Applovin Corp. (NASDAQ:APP), Robinhood Markets Inc. (NASDAQ:HOOD), and Coinbase Global Inc. (NASDAQ:COIN). These stocks are characterized by their momentum and tenuous links to traditional valuation metrics, as per a MarketWatch report.
The bank has identified a group of high-beta stocks. The list includes two of Cramer's PARC picks, Palantir and Coinbase, along with retail investor favorites like Nvidia Corp. (NASDAQ:NVDA), Super Micro Computer (NASDAQ:SMCI) and Tesla Inc. (NASDAQ:TSLA)
Lakos-Bujas and his team at JPMorgan have pinpointed three occasions this year when investment style factors underwent “extreme crowding episodes.” They noted that the recent surge in high-beta stocks, which are more volatile than the market, is the fastest move from the 25th to the 100th percentile in three decades.
The latest episode, now at the 100th percentile, centers on high-beta stocks. The team believes that this overcrowding is not sustainable and poses a risk to the broader market. They also observed a decrease in short interest in high-beta stocks, suggesting that investors are not adequately hedged against potential selloffs.
“While some argue high-beta crowding could persist, we believe the current 100%-tile crowding based on our quantitative analysis not only presents a risk for this crowded segment, but is also a red flag for the broader market implying there is rising complacency in the short term,” the JPMorgan team wrote.
As an alternative, the team suggests investors consider going long on Low Vol Aristocrats, which have underperformed the market by 19% since April 8. Their top five stocks in this category include Coca-Cola Co. (NYSE:KO), Allegion PLC (NYSE:ALLE), Intercontinental Exchange Inc. (NYSE:ICE), CME Group Inc. (NASDAQ:CME), and Cboe Global Markets Inc. (CBOE: CBOE).
Why It Matters: The ‘PARC’ stocks have been a hot topic in the market, with Cramer’s new acronym sparking discussions. The stocks have been performing well, with Coinbase hitting a market capitalization of $100 billion and Robinhood showing strong technical performance.
Meanwhile, Tech bull Daniel Ives has unveiled his top five stock picks for the second half of 2025, reaffirming his view that the "golden age of tech" is underway, driven by the accelerating artificial intelligence (AI) revolution.
In a post on X, Ives named Nvidia, Palantir Technologies, Microsoft Corp. (NASDAQ:MSFT), Meta Platforms Inc. (NASDAQ:META) and Tesla as his top selections for the rest of the year.
However, JPMorgan’s warning about the potential risks associated with high-beta stocks could signal a shift in market sentiment. Investors may want to consider alternative strategies, such as low volatility stocks, which JPMorgan believes present an attractive risk/reward.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
