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4 Top-Ranked Momentum Picks Using Driehaus Strategy
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Richard Herman Driehaus used the "buy high and sell higher" rule to create an investment approach. Investors with a high level of risk appetite may think of using this particular investment strategy. Investors principally invest in momentum stocks using the Driehaus strategy. The success of this investment approach eventually helped Richard Driehaus make a place in Barron’s All-Century Team.
Portfolios such as that of The American Association of Individual Investors (“AAII”) have proved time and again that the strategy has the potential to offer high returns. 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
In order to make the strategy more profitable, we have considered only those stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and 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 greater than 0 and industry median
Higher EPS growth compared to the industry average indicates superior earnings performance
• Last four-quarter average EPS surprise greater than 5%
Solid EPS surprise history indicates better price performance
• Positive percentage change in 50-day moving average and relative strength over 4 weeks
Positive percentage change in 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 have narrowed down the universe of over 7,689 stocks to only 25.
Here are four of the 25 stocks:
AutoNation, Inc. (AN - Free Report) is an automotive retailer in the United States. It has a Momentum Score of A. The trailing four-quarter earnings surprise is 48%, on average.
Byline Bancorp, Inc. (BY - Free Report) is the bank holding company for Byline Bank. It has a Momentum Score of B and a trailing four-quarter earnings surprise of 57.4%, on average.
Kinder Morgan, Inc. (KMI - Free Report) is engaged in energy transportation and storage in North America. It has a Momentum Score of B. The trailing four-quarter earnings surprise is 48.6%, on average.
Echo Global Logistics, Inc. is a provider of technology enabled transportation and supply chain management services. It has a Momentum Score of A and a four-quarter earnings surprise of 47.5%, on average.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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.
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4 Top-Ranked Momentum Picks Using Driehaus Strategy
Richard Herman Driehaus used the "buy high and sell higher" rule to create an investment approach. Investors with a high level of risk appetite may think of using this particular investment strategy. Investors principally invest in momentum stocks using the Driehaus strategy. The success of this investment approach eventually helped Richard Driehaus make a place in Barron’s All-Century Team.
Portfolios such as that of The American Association of Individual Investors (“AAII”) have proved time and again that the strategy has the potential to offer high returns. 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
In order to make the strategy more profitable, we have considered only those stocks that have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and 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
No matter whether the market is good or bad, stocks with a Zacks Rank #1 have a proven history of outperformance. 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 greater than 0 and industry median
Higher EPS growth compared to the industry average indicates superior earnings performance
• Last four-quarter average EPS surprise greater than 5%
Solid EPS surprise history indicates better price performance
• Positive percentage change in 50-day moving average and relative strength over 4 weeks
Positive percentage change in 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 have narrowed down the universe of over 7,689 stocks to only 25.
Here are four of the 25 stocks:
AutoNation, Inc. (AN - Free Report) is an automotive retailer in the United States. It has a Momentum Score of A. The trailing four-quarter earnings surprise is 48%, on average.
Byline Bancorp, Inc. (BY - Free Report) is the bank holding company for Byline Bank. It has a Momentum Score of B and a trailing four-quarter earnings surprise of 57.4%, on average.
Kinder Morgan, Inc. (KMI - Free Report) is engaged in energy transportation and storage in North America. It has a Momentum Score of B. The trailing four-quarter earnings surprise is 48.6%, on average.
Echo Global Logistics, Inc. is a provider of technology enabled transportation and supply chain management services. It has a Momentum Score of A and a four-quarter earnings surprise of 47.5%, on average.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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.