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How to Find Top-Ranked Momentum Stocks to Buy in September

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Wall Street cooled off late last week ahead of the long Labor Day holiday weekend and some of that quiet trading carried over into the first day of trading this week. Stocks ebbed and flowed between small gains and losses through early afternoon on Tuesday.

The market is still trying to assess the recent wave of economic data from the U.S. and how the ongoing slowdown in China might impact global growth.

Many on Wall Street continue to lean toward a soft landing in the U.S. as the economy continues to slowly cool, while remaining stable. In fact, Goldman Sachs once again lowered its chances of a U.S. recession over the next 12 months to 15% vs. 35% back in March.

Even though rates will likely have to stay higher for longer to fight inflation, investors are still betting that the Fed is near the end of its actual tightening cycle. The bullish case for U.S. markets is even easier to understand when looking ahead to the outlook for S&P 500 earnings growth in 2024 and 2025—11.8% and 11%, respectively.

The bulls utilized the much-needed August pullback as a chance to buy into stocks at more attractive levels, helping send the S&P 500 and the Nasdaq back above their 50-day moving averages in roughly two weeks.  

Zacks Investment Research
Image Source: Zacks Investment Research

Of course, there could always be more selling in the coming weeks and months. But long-term investors shouldn’t try too hard to time the market, with the last three and a half years serving as a useful example.

The screen we explore today helps investors find Zacks Rank #1 (Strong Buy) stocks that also boast strong upward price momentum that might be worth buying in September and beyond.

Screen Basics

The screen we are looking into today comes loaded with the Research Wizard. The screen helps investors dig through all of the Zacks Rank #1 (Strong Buy) stocks, of which there are over 200 at any given time, to find some of the top momentum names.

The screen narrows down the list of Zacks Rank #1 (Strong Buy) stocksto those with upward price momentum that are also trading within 20% of their 52-week highs.

The screen then uses the PEG ratio and the Price to Sales ratio to help make sure investors are getting value as well. The screen then makes your life a little easier and narrows it down to just seven stock picks.

The screen basics are listed below…

·       Zacks Rank = #1 (Strong Buy)

·       Current Price/52-week High >= 0.8

·       PEG Ratio: P/E F(1)/EPS Growth <= 1

·       Price/Sales <= 3

·       Percentage Change Price -12 Weeks = Top # 7

This strategy comes loaded with the Research Wizard and it is called bt_sow_momentum_method1 It can be found in the SoW (Screen of the Week) folder.

The screen is pretty simple, yet powerful. Here is one of the seven stocks that made it through this week's screen…

Constellation Energy Corporation ((CEG - Free Report) )

Constellation is a nuclear energy powerhouse that spun off from Exelon in early 2022. Constellation produces roughly 10% of all of the clean and renewable energy in the U.S., and boasts that it’s “the nation’s largest producer of carbon-free energy.”

Constellation and the wider nuclear energy industry are gaining steam as the U.S. and many countries around the world realize that nuclear must play a much more significant role in the energy landscape if they hope to reach their emissions goals.

Constellation is benefitting from the energy-focused aspects of the Inflation Reduction Act, which CEG’s CEO said puts nuclear on a level playing field with other clean energy. Constellation topped our Q2 earnings estimate in early August and upped its guidance, with its FY23 consensus 28% higher and its outlook for FY24 up 10%. CEG’s upward earnings revisions help it grab that Zacks Rank #1 (Strong Buy) and its earnings growth outlook is impressive.

Zacks Investment Research
Image Source: Zacks Investment Research

Constellation shares have climbed 18% in the last three months and roughly 100% since its market debut. CEG is currently trading solidly above its 50-day and 200-day moving averages.

The nuclear energy stock trades right at its median of 18.0X forward 12-month earnings and 40% below its highs, which also puts its near it Alternative Energy industry’s average. And Wall Street is pretty high on Constellation stock, with seven of the 11 brokerage recommendations Zacks has at “Strong Buys.”

Click here to sign up for a free trial to the Research Wizard today.

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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.

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