The CBOE Volatility Index (VIX) is back to a more familiar territory of 15-20 points after spending some time well below that range. The second half of the year 2017 saw the VIX oscillate within the confines of about 9.50-11.50 marking one of its lowest sessions in history.

This period was accompanied by what investors perceived to be a stable stock market with stocks rallying steadily without major pullbacks. However, that changed at the start of this year, especially last month when the VIX spiked to hit 29 points before pulling back to settle at the current range of about 17-19 points.

Chart via GuruFocus.com

When the markets are extremely volatile, it is difficult to point the immediate direction for individual stocks that have a high beta. These are the stocks whose stock prices are likely to mirror the movement of major market indices. When the market volatility is high, their risk profiles rise with it. So, in this case, you could put major technology stocks in that bracket, as well as, some large banks.

Generally, these are the types of stocks that are not atypical of value stocks. If you go by the general concept of value investing, which focuses on the company’s intrinsic value per share versus the market price, then you are unlikely to find mega-cap tech, bank or even health stocks that can be perceived to be undervalued. And with volatility up in the sky, it even becomes a lot more difficult to identify reliable value plays.

Therefore, under these circumstances some investors find themselves chasing stocks that trade at relatively low prices in dollar terms, including penny stocks. However, according to Ray Blanco of Agora Financial, and the editor the publisher’s penny stock newsletter, identifying value in penny stocks can be costly and trickier than in blue-chip stocks. That said, when an investor manages to scour the market and find the best growth candidates then the returns are equally generous.

Growth stocks are probably some of the best candidates for value in a volatile market. Investors choose them with a long-term view that’s backed by ongoing projects and the ability to deliver better results in the foreseeable future, rather than their present intrinsic value versus the market value.

So, what do you look for in a growth stock?

Ideally, most growth stocks are backed by activity in their product pipeline. However, some of the best growth stocks in history paid off because they disrupted a specific segment of the industry they operate in. Twenty years ago, Amazon.com (AMZN) would have made a perfect growth stock because it disrupted retail.

It continues to attract investors from all walks of life. The driving forces? Well, it is all about sales. The company’s sales have continued to sky-rocket and in fulfilling one of the main characteristics of a growth stock, the company continues to invest in new business segments by capitalizing on its massive membership pool to disrupt new markets. And investors continue to buy into the company’s never-ending growth story.

But when you look at other tech giants like Microsoft Corporation (MSFT) and International Business Machines (IBM), or large pharma companies like Pfizer (PFE) and AstraZeneca (AZN), we could say that their growth stories ended a while back. Or, maybe there is still some room left, but evidently not as exciting as is the case of Amazon or Netflix Inc. (NFLX).

So, basically, while some large tech companies might significantly bend to the will of the general market volatility and thus mirror the up and down trend when you look deeper into the numbers and emerging projects, you could identify some exciting growth stories in the making. And that makes those stocks considerable candidates for value plays.

The task can be a little bit difficult when dealing with a penny stock or a small cap stock. Most penny stocks, especially those traded in pink sheets barely post any revenues or quantifiable information on ongoing projects. However, when you look at some that are traded on major exchanges like NASDAQ or the NYSE, then chances are that these, as well, could be potential candidates for value investing that is based on top line growth potential rather than undervaluation.

Conclusion

In summary, the dynamic nature of the modern financial markets coupled with rising volatility levels has changed the general concept of value investing. It has become a lot difficult to identify undervalued stocks. However, growth-driven value investing is still very applicable in today's markets and even mega-cap stocks can qualify as potential growth stocks when they continue to expand their product pipeline to new and disruptive markets.