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Momentum Building: 4 Stocks That Could Move Higher After a Strong Week
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Should you consider stocks that have been trading higher just recently? Buying stocks that have already appreciated quite a bit may sound risky because whatever the trigger may have been, there’s the risk that it has run its course. Or worse, that valuations have gone too high and they’re now headed down. But believe it or not, this may not always be the case. Often, we find that even if valuations look rich, the stock keeps trading higher.
There are a number of reasons why stocks take off:
First, if there’s positive news about a company or the overall economy, it can cause stocks to rise. For example, if a company announces that it has beat earnings expectations (generally has a long tail), or if the government releases data that shows that the economy is growing, this could lead to higher stock prices.
Second, if investors are optimistic about the future, they may be willing to pay higher prices for stocks. This is often the case when interest rates are conducive, or when there are signs that the economy is improving, or the industry in which the company operates has a few things going for it.
Third, there can be technical reasons. Sometimes, stocks can go higher simply because they have been rising in recent weeks. Momentum builds up in a stock when more people start buying it. Because of the increased demand and limited supply, prices go up. This gets more people optimistic about the stock, which further increases the price. And so on. This is known as a "momentum trade." Momentum traders often buy stocks that have been rising in the hope that they will continue to rise.
For investors, the risks of overpaying for a stock that they think is a momentum play is a real risk. Therefore, it pays to do your research and buy stocks that are otherwise sound, or good to hold. In such as case, the chances of the momentum continuing is higher. And yes, you should always set a stop-loss (the price at which you will sell the stock if it falls below a certain level). As the name suggests, this helps you limit your losses in case there’s a trend reversal. It’s worth noting that a trend reversal usually doesn’t happen in the case of a good stock and you would in such cases see a loss of momentum instead that allows you the time to offload the shares.
Other than that, you could also try the proprietary methodology that Zacks has developed in the stock ranking and style score systems. This generates a Strong Buy (#1), Buy (#2), Hold (#3), Sell (#4) or Strong Sell (#5) rating on stocks. Additionally, the style score system generates grades (A,B, C, etc.) for Value, Growth and Momentum plays. So, if a stock has a #1 or #2 rating and Momentum Score of A or B, this indicates it should be worth buying for its momentum. Let’s take a look at some examples:
New Albany, OH-based Abercrombie & Fitch operates as a specialty retailer in the U.S., Europe, the Middle East, Asia, the Asia-Pacific and Canada. Its two operating segments are Hollister and Abercrombie. It offers an assortment of apparel, personal care products and accessories for men, women and kids under the Hollister, Gilly Hicks, Social Tourist, Abercrombie & Fitch and Abercrombie kids brands. The company sells products through its stores; various wholesale, franchise, and licensing arrangements; and e-commerce platforms.
The Zacks Rank #1 stock with Momentum Score A is up 36.5% in the past week, as the company posted very strong earnings results, beating the Zacks Consensus Estimate of a 2-cent loss by 41 cents. The earnings estimate for the current year ending January 2024 jumped 33 cents (23.1%). The 2025 estimate jumped 28 cents (14.7%). While they are trading at a 21% premium to the industry, ANF shares are still pretty close to their median value over the past year and at a discount of around 13% to the S&P 500.
Reading, Pennsylvania-based EnerSys is a global company that specializes in stored energy solutions for various industrial applications worldwide. With three segments - Energy Systems, Motive Power and Specialty, EnerSys offers a range of products and services. These include uninterruptible power systems (UPS) for computers and telecommunications, switchgear and control systems for industrial facilities, large-scale energy storage solutions, power solutions for broadband and renewable energy, thermally managed cabinets, motive power products for electric forklifts, specialty batteries for transportation and defense applications, and battery chargers.
The Zacks Rank #1 stock with Momentum Score A is up 16.6% in the past week. This reflected another solid performance for the company, which posted the strongest earnings surprise of 31.9% in the last four quarters. Estimates responded in kind, going up 71 cents (11.6%) for the year ending March 2024, with a 19.7% increase from these levels in 2025. The shares are trading at a 25.5% discount to the industry and a 19.9% discount to the S&P 500, leaving much room for upside.
Fort Washington, Pennsylvania-based Toll Brothers is a leading luxury homebuilder in the United States. It designs, builds and sells a wide range of detached and attached homes in upscale residential communities. Additionally, Toll Brothers City Living designs, builds and selling condominiums. Some of its homes have special features like single-story living and recreational amenities like golf courses and fitness centers. It is also involved in land development, apartment rentals and interior fit-outs. Toll Brothers serves different buyer segments and has a strategic partnership with Equity Residential.
The Zacks Rank #1 stock has a Momentum Score A. Despite the 7.5% increase in share prices over the past week, the shares are very likely headed higher. That’s because the company has posted a solid earnings surprise of over 50%, sending the Zacks Consensus Estimates for 2023 and 2024 (ending October) up a respective $1.01 (11.7%) and $1.64 (20.3%). The shares are still undervalued however, considering the discount of 23.4% to the industry and 61.5% to the S&P 500.
Plainview, New York-based Veeco Instruments is a global manufacturer of semiconductor and thin film process equipment used in the production of electronic devices. Its product offerings include laser annealing, ion beam deposition and etch; chemical vapor deposition; and other deposition systems, as well as packaging lithography equipment. Veeco's systems are utilized in the production of microelectronic components for various applications. The company serves a wide range of customers, including integrated device manufacturers, foundries, research centers and universities.
The Zacks Rank #1 stock with a Momentum Score B appreciated 6.8% in the past week. While its earnings beat of 50% was rather impressive and both 2023 and 2024 estimates have continued to rise in the past week, the earnings report itself is nearly a month old. Therefore, it’s only the increasing estimates that are maintaining momentum in this stock. The valuation picture is also mixed. The shares are trading at a 21.8% discount to the industry, which is positive. But again, this is an 18% premium to the S&P 500, which is not so positive. However, given that they still carry a Zacks #1 rank, the overall prospects may be considered positive.
One-Month Price Performance
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Momentum Building: 4 Stocks That Could Move Higher After a Strong Week
Should you consider stocks that have been trading higher just recently? Buying stocks that have already appreciated quite a bit may sound risky because whatever the trigger may have been, there’s the risk that it has run its course. Or worse, that valuations have gone too high and they’re now headed down. But believe it or not, this may not always be the case. Often, we find that even if valuations look rich, the stock keeps trading higher.
There are a number of reasons why stocks take off:
First, if there’s positive news about a company or the overall economy, it can cause stocks to rise. For example, if a company announces that it has beat earnings expectations (generally has a long tail), or if the government releases data that shows that the economy is growing, this could lead to higher stock prices.
Second, if investors are optimistic about the future, they may be willing to pay higher prices for stocks. This is often the case when interest rates are conducive, or when there are signs that the economy is improving, or the industry in which the company operates has a few things going for it.
Third, there can be technical reasons. Sometimes, stocks can go higher simply because they have been rising in recent weeks. Momentum builds up in a stock when more people start buying it. Because of the increased demand and limited supply, prices go up. This gets more people optimistic about the stock, which further increases the price. And so on. This is known as a "momentum trade." Momentum traders often buy stocks that have been rising in the hope that they will continue to rise.
For investors, the risks of overpaying for a stock that they think is a momentum play is a real risk. Therefore, it pays to do your research and buy stocks that are otherwise sound, or good to hold. In such as case, the chances of the momentum continuing is higher. And yes, you should always set a stop-loss (the price at which you will sell the stock if it falls below a certain level). As the name suggests, this helps you limit your losses in case there’s a trend reversal. It’s worth noting that a trend reversal usually doesn’t happen in the case of a good stock and you would in such cases see a loss of momentum instead that allows you the time to offload the shares.
Other than that, you could also try the proprietary methodology that Zacks has developed in the stock ranking and style score systems. This generates a Strong Buy (#1), Buy (#2), Hold (#3), Sell (#4) or Strong Sell (#5) rating on stocks. Additionally, the style score system generates grades (A,B, C, etc.) for Value, Growth and Momentum plays. So, if a stock has a #1 or #2 rating and Momentum Score of A or B, this indicates it should be worth buying for its momentum. Let’s take a look at some examples:
Abercrombie & Fitch Co. (ANF - Free Report)
New Albany, OH-based Abercrombie & Fitch operates as a specialty retailer in the U.S., Europe, the Middle East, Asia, the Asia-Pacific and Canada. Its two operating segments are Hollister and Abercrombie. It offers an assortment of apparel, personal care products and accessories for men, women and kids under the Hollister, Gilly Hicks, Social Tourist, Abercrombie & Fitch and Abercrombie kids brands. The company sells products through its stores; various wholesale, franchise, and licensing arrangements; and e-commerce platforms.
The Zacks Rank #1 stock with Momentum Score A is up 36.5% in the past week, as the company posted very strong earnings results, beating the Zacks Consensus Estimate of a 2-cent loss by 41 cents. The earnings estimate for the current year ending January 2024 jumped 33 cents (23.1%). The 2025 estimate jumped 28 cents (14.7%). While they are trading at a 21% premium to the industry, ANF shares are still pretty close to their median value over the past year and at a discount of around 13% to the S&P 500.
EnerSys (ENS - Free Report)
Reading, Pennsylvania-based EnerSys is a global company that specializes in stored energy solutions for various industrial applications worldwide. With three segments - Energy Systems, Motive Power and Specialty, EnerSys offers a range of products and services. These include uninterruptible power systems (UPS) for computers and telecommunications, switchgear and control systems for industrial facilities, large-scale energy storage solutions, power solutions for broadband and renewable energy, thermally managed cabinets, motive power products for electric forklifts, specialty batteries for transportation and defense applications, and battery chargers.
The Zacks Rank #1 stock with Momentum Score A is up 16.6% in the past week. This reflected another solid performance for the company, which posted the strongest earnings surprise of 31.9% in the last four quarters. Estimates responded in kind, going up 71 cents (11.6%) for the year ending March 2024, with a 19.7% increase from these levels in 2025. The shares are trading at a 25.5% discount to the industry and a 19.9% discount to the S&P 500, leaving much room for upside.
Toll Brothers, Inc. (TOL - Free Report)
Fort Washington, Pennsylvania-based Toll Brothers is a leading luxury homebuilder in the United States. It designs, builds and sells a wide range of detached and attached homes in upscale residential communities. Additionally, Toll Brothers City Living designs, builds and selling condominiums. Some of its homes have special features like single-story living and recreational amenities like golf courses and fitness centers. It is also involved in land development, apartment rentals and interior fit-outs. Toll Brothers serves different buyer segments and has a strategic partnership with Equity Residential.
The Zacks Rank #1 stock has a Momentum Score A. Despite the 7.5% increase in share prices over the past week, the shares are very likely headed higher. That’s because the company has posted a solid earnings surprise of over 50%, sending the Zacks Consensus Estimates for 2023 and 2024 (ending October) up a respective $1.01 (11.7%) and $1.64 (20.3%). The shares are still undervalued however, considering the discount of 23.4% to the industry and 61.5% to the S&P 500.
Veeco Instruments Inc. (VECO - Free Report)
Plainview, New York-based Veeco Instruments is a global manufacturer of semiconductor and thin film process equipment used in the production of electronic devices. Its product offerings include laser annealing, ion beam deposition and etch; chemical vapor deposition; and other deposition systems, as well as packaging lithography equipment. Veeco's systems are utilized in the production of microelectronic components for various applications. The company serves a wide range of customers, including integrated device manufacturers, foundries, research centers and universities.
The Zacks Rank #1 stock with a Momentum Score B appreciated 6.8% in the past week. While its earnings beat of 50% was rather impressive and both 2023 and 2024 estimates have continued to rise in the past week, the earnings report itself is nearly a month old. Therefore, it’s only the increasing estimates that are maintaining momentum in this stock. The valuation picture is also mixed. The shares are trading at a 21.8% discount to the industry, which is positive. But again, this is an 18% premium to the S&P 500, which is not so positive. However, given that they still carry a Zacks #1 rank, the overall prospects may be considered positive.
One-Month Price Performance
Image Source: Zacks Investment Research