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One of the most widely used investment approaches for those interested in momentum stocks is the Driehaus strategy. This is based on the "buy high and sell higher" principle and used by investors with a high-risk appetite. The success of this investing strategy helped Driehaus to earn a place in Barron’s All-Century Team.
Portfolios such as that of The American Association of Individual Investors (“AAII”) proved that the strategy has the potential to offer high returns. AAII’s portfolio, which was developed following the strategy, returned 13.5% and 18.1% in the five and 10- year time frames, respectively, compared with -1.1% and 4.2% returns for the S&P 500. Thus, investors with a high risk appetite may opt for this strategy.
A Look at Driehaus’ Strategy
After a detailed study of the Driehaus’ strategy, AAII concluded that it mainly focuses on strong earnings growth rates and impressive prospects to pick potential outperformers. While this strategy was made to provide better returns over the longer haul, companies with a strong history of beating estimates were also given importance.
“I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in a decline and try to guess when it will turn around,” Driehaus had said in an interview.
Screening Parameters
The percentage 50-day moving average is one of the key criteria in this strategy. A positive percentage 50-day moving average indicates that the stock is trading at a price higher than its 50-day moving average level, indicating an uptrend. It is calculated by dividing the numerator (month-end price minus 50-day moving average of month-end price) by the 50-day moving average of the month-end price. Another momentum indicator – positive relative strength – has also been included in this strategy.
In order to make the strategy more profitable, we have only considered those stocks that have a Zacks Rank #1 (Strong Buy) as well as a momentum score of ‘A’ or ‘B’. Our research shows that stocks with a Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 offer the best upside potential.
(Strong EPS growth history ensures improving business.)
• Trailing 12 month EPS growth higher than 0 and industry median
(Higher EPS growth compared to the industry average indicates superior stocks.)
• Last four-quarter average EPS surprise greater than 5%
(Positive EPS surprise indicates potential.)
• Positive % 50-day moving average and relative strength over 4 weeks
(High % 50-day moving average and relative strength signal uptrend.)
• Momentum Score equal to or less than B
(A favorable Momentum Score indicates that it is ideal to take advantage of the momentum with the highest probability of success.)
These few parameters narrowed down the universe of over 7,881 stocks to only 15.
Here are five of the 15 stocks:
JA Solar Holdings Co., Ltd.(Nasdaq: JASO– Free Report) is a manufacturer and seller of solar power products based on crystalline silicon technologies. The company has a Momentum Score of A and an average four-quarter positive earnings surprise of more than 100%.
BioTelemetry, Inc. (Nasdaq: BEAT– Free Report) is a provider of cardiac monitoring device manufacturing and centralized cardiac core laboratory services. The company has a Momentum Score of A and an average four-quarter positive earnings surprise of 16.9%.
Arista Networks, Inc.(NYSE: ANET– Free Report) is a supplier of cloud networking solutions. The company has a Momentum Score of A and an average four-quarter positive earnings surprise of 22.8%.
Owens Corning(NYSE: OC– Free Report) is a producer and seller of glass fiber reinforcements and other materials. The company has a Momentum Score of B and an average four-quarter positive earnings surprise of 20.2%.
Aaron's, Inc.(NYSE: AAN– Free Report) is an omnichannel provider of lease-purchase solutions. The company has a Momentum Score of A and an average four-quarter positive earnings surprise of 14%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don’t wait for the market to get better before you decide to do better. Start learning how to be a better trader today: https://at.zacks.com/?id=111
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!Click here for your free subscription to Profit from the Pros.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks.com featured highlights include JA Solar Holdings, BioTelemetry, Arista Networks, Owens Corning and Aaron's
For Immediate Release
Chicago, IL – September 22, 2017 - Stocks in this week’s article include JA Solar Holdings Co., Ltd. (Nasdaq: – Free Report), BioTelemetry, Inc. (Nasdaq: (BEAT - Free Report) – Free Report), Arista Networks, Inc.(NYSE: (ANET - Free Report) – Free Report), Owens Corning(NYSE: (OC - Free Report) – Free Report)and Aaron's, Inc.(NYSE: (AAN - Free Report) – Free Report).
Screen of the Week of Zacks Investment Research:
5 Momentum Stocks Powered by Driehaus Strategy
One of the most widely used investment approaches for those interested in momentum stocks is the Driehaus strategy. This is based on the "buy high and sell higher" principle and used by investors with a high-risk appetite. The success of this investing strategy helped Driehaus to earn a place in Barron’s All-Century Team.
Portfolios such as that of The American Association of Individual Investors (“AAII”) proved that the strategy has the potential to offer high returns. AAII’s portfolio, which was developed following the strategy, returned 13.5% and 18.1% in the five and 10- year time frames, respectively, compared with -1.1% and 4.2% returns for the S&P 500. Thus, investors with a high risk appetite may opt for this strategy.
A Look at Driehaus’ Strategy
After a detailed study of the Driehaus’ strategy, AAII concluded that it mainly focuses on strong earnings growth rates and impressive prospects to pick potential outperformers. While this strategy was made to provide better returns over the longer haul, companies with a strong history of beating estimates were also given importance.
“I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in a decline and try to guess when it will turn around,” Driehaus had said in an interview.
Screening Parameters
The percentage 50-day moving average is one of the key criteria in this strategy. A positive percentage 50-day moving average indicates that the stock is trading at a price higher than its 50-day moving average level, indicating an uptrend. It is calculated by dividing the numerator (month-end price minus 50-day moving average of month-end price) by the 50-day moving average of the month-end price. Another momentum indicator – positive relative strength – has also been included in this strategy.
In order to make the strategy more profitable, we have only considered those stocks that have a Zacks Rank #1 (Strong Buy) as well as a momentum score of ‘A’ or ‘B’. Our research shows that stocks with a Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 or 2 offer the best upside potential.
• Zacks Rank equal to #1
(Only Strong Buy rated stocks can get through. You can see the complete list of today’s Zacks #1 Rank stocks here.)
• Last 5-year average EPS growth rates above 2%
(Strong EPS growth history ensures improving business.)
• Trailing 12 month EPS growth higher than 0 and industry median
(Higher EPS growth compared to the industry average indicates superior stocks.)
• Last four-quarter average EPS surprise greater than 5%
(Positive EPS surprise indicates potential.)
• Positive % 50-day moving average and relative strength over 4 weeks
(High % 50-day moving average and relative strength signal uptrend.)
• Momentum Score equal to or less than B
(A favorable Momentum Score indicates that it is ideal to take advantage of the momentum with the highest probability of success.)
These few parameters narrowed down the universe of over 7,881 stocks to only 15.
Here are five of the 15 stocks:
JA Solar Holdings Co., Ltd.(Nasdaq: JASO– Free Report) is a manufacturer and seller of solar power products based on crystalline silicon technologies. The company has a Momentum Score of A and an average four-quarter positive earnings surprise of more than 100%.
BioTelemetry, Inc. (Nasdaq: BEAT– Free Report) is a provider of cardiac monitoring device manufacturing and centralized cardiac core laboratory services. The company has a Momentum Score of A and an average four-quarter positive earnings surprise of 16.9%.
Arista Networks, Inc.(NYSE: ANET– Free Report) is a supplier of cloud networking solutions. The company has a Momentum Score of A and an average four-quarter positive earnings surprise of 22.8%.
Owens Corning(NYSE: OC– Free Report) is a producer and seller of glass fiber reinforcements and other materials. The company has a Momentum Score of B and an average four-quarter positive earnings surprise of 20.2%.
Aaron's, Inc.(NYSE: AAN– Free Report) is an omnichannel provider of lease-purchase solutions. The company has a Momentum Score of A and an average four-quarter positive earnings surprise of 14%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
Sign up now for your free trial today and start picking better stocks immediately. And with the backtesting feature, you can test your ideas to see how you can improve your trading in both up markets and down markets. Don’t wait for the market to get better before you decide to do better. Start learning how to be a better trader today: https://at.zacks.com/?id=111
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use. Each week, Zacks Profit from the Pros free email newsletter shares a new screening strategy. Learn more about it here https://at.zacks.com/?id=112
About Zacks
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time!Click here for your free subscription to Profit from the Pros.
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Visit: https://www.zacks.com/performance
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.