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7 Hot Momentum Stocks to Watch in 2017

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2016 will likely be remembered as one of those indelible years that do not fade anytime soon. An unexpected regime change, a long overdue interest hike and one of the fastest economic growths in recent times will surely make it an unforgettable one.

Entering into 2017, President-elect Donald Trump’s unconventional and somewhat criticized policy stance on international affairs may spook even the toughest investors. At this point, it will be safe to note that economists are exercising caution regarding major policy changes regarding tax cuts and tariffs.

ther areas of concern include a slower-than-expected productivity growth and increasing rate of retirement of baby boomers. Amid this cacophony, it makes some sense to coast your portfolio with some robust picks that promise handsome returns, entering into 2017.

Look Out for Trends

While the road ahead may be bumpy, the key indicators at the moment are nothing less than impressive. A recent Morgan Stanley report signals that growth rates and global exports are expected to surge higher and unemployment rates are likely to go down further, thus painting a sunny picture. Further, an improvement in Consumer Confidence Index as well as the U.S. factory activity data looks promising.

The uptick in economic activity is in tandem with the overall stock market performance that seems to have hit a purple patch. The Dow Jones index has trended upward, sharply since the election, registering six weekly gains. As a matter of fact, major indexes including Dow Jones Industrial Average (DJI), NASDAQ Composite (IXIC) and S&P 500 (GSPC) are up 14.4%, 9.3% and 10.8%, respectively.

In such a scenario, momentum investing can prove to be a reliable strategy for investors, wanting to secure high returns, over a short span. Momentum is basically a tendency of stocks which have outperformed the market in the recent past and expected to do so. It is based on the idea that once a trend is established it is unlikely to go against the drift.  

Why Does this Strategy Work?

What may come across as a surprise for some, the momentum strategy primarily works because of human error, emotional responses and mistakes! Sometimes it may happen that stocks remain undervalued due to prolonged under reaction on part of investors, despite bullish growth drivers. Meanwhile, news pertaining to robust sales, surging profit levels, bullish earnings prospects and strategic acquisitions can drive the stock higher.

Once the positive news about the stocks is absorbed by the market, the unwarranted under reaction wears off and dramatic price increases occur. As investors continue to extrapolate the trends into future, it leaves huge opportunities for momentum players to earn some handsome profits.

Screening the Stocks

Picking the right momentum stocks may baffle even seasoned investors, let alone new ones who are planning to enter the uncharted world of jam-packed trades. Here at Zacks, we use our style score system to single out the stocks that can help you beat the market. The Zacks Momentum Style Score indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success.

Our research shows that stocks with a Momentum Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential in the short term. Further, we have refined our search by considering stocks with market capitalization of $1 billion or more that have that have gained 5%, over the past four weeks, and still appear to have plenty of upside left. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Seven Hot Momentum Stocks

Founded in 1869, The Goldman Sachs Group, Inc. (GS - Free Report) is a leading global financial holding company providing investment banking, securities and investment management services to a diversified client base. The company holds a Zacks Rank #1 (Strong Buy).

Momentum Score: A

Market Capitalization: $96.7 billion

Stock Price Return: 15.2%

(Looking for the Best Stocks for 2017? Be among the first to see our Top Ten Stocks for 2017 portfolio here.)

Noble Energy, Inc. , the parent company of Samedan Oil Corporation, Noble Gas Marketing, Inc. and Noble Trading, Inc., is one of the nation's leading independent energy companies. The company holds a Zacks Rank #2 (Buy).

Momentum Score: A

Market Capitalization: $17.1 billion

Stock Price Return: 12.3%

Jabil Circuit, Inc. (JBL - Free Report) is a worldwide independent provider of electronic manufacturing services. It designs and manufactures electronic circuit board assemblies and systems for major original equipment manufacturers. The company carries a Zacks Rank #2.

Momentum Score: A

Market Capitalization: $44.6 billion

Stock Price Return: 11.4%

Public Service Enterprise Group Inc. (PEG - Free Report) has been an active participant in the ongoing policy debate on how the energy industry can best contribute to achieving the nation's environmental objectives. The company holds a Zacks Rank #2.

Momentum Score: A

Market Capitalization: $22.1 billion

Stock Price Return: 7.0%

Marriott Vacations Worldwide Corp. (VAC - Free Report) is a developer, marketer, seller and manager of vacation ownership resorts and vacation club, destination club and exchange programs, principally under the Marriott and Ritz-Carlton brands and trademarks. The company holds a Zacks Rank #2.

Momentum Score: A

Market Capitalization: $23.4 billion

Stock Price Return: 7.9%

Redmond, Washington-based Microsoft Corp. (MSFT - Free Report) is one of the largest broad-based technology providers in the world today. Although software is the most important revenue source, the Zacks Rank #2 stock’s offerings also include hardware and online services.

Momentum Score: A

Market Capitalization: $494.0 billion

Stock Price Return: 5.2%

Founded in 1935 and incorporated under the laws of the State of Delaware in 1981, Morgan Stanley (MS - Free Report) is the leading financial services holding company headquartered in New York. With around 55,256 employees, the Zacks Rank #1 company serves a diversified group of clients and customers, including corporations, governments, financial institutions and individuals through more than 1,200 offices across 43 countries.

Momentum Score: A

Market Capitalization: $81.0 billion

Stock Price Return: 5.2%

Conclusion

It seems to be the ideal time to go by Wall Street’s relatively new buzz word, “Buy High and Sell Higher” and lookout for undervalued stocks that can scale new heights. Given that a sizable section of investors today favor betting on winning stocks, with the belief that they can still soar higher, it is the right time to hitch the momentum ride.

Where Do Zacks' Investment Ideas Come From?

You are welcome to download the full, up-to-the-minute list of 220 Zacks Rank #1 "Strong Buy" stocks free of charge. There is no better place to start your own stock search. Plus you can access the full list of must-avoid Zacks Rank #5 "Strong Sells" and other private research. See the stocks free >>

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