Wall Street’s nightmare continues as it finished a disappointing August. U.S. stock markets rallied in the first half of last month as part of the bull run that started in mid-June. However, the gains of the first half were more than offset by a sharp decline in the second half. Finally, the Dow, the S&P 500 and the Nasdaq Composite declined 4.1%, 4.2% and 4.6%, respectively, in August.
Investors are highly worried about market’s behavior in September, which is historically the worst-performing month on Wall Street. This year, the situation is more serious as the U.S. economy is suffering from record-high inflation, an extremely hawkish Fed and the threat of a near-term recession.
Despite these headwinds, we take a contra view choosing five stocks with a favorable Zacks Rank that have strong momentum for September. These stocks have popped in the past month and have more upside left. The companies are —-
Marathon Petroleum Corp. ( MPC Quick Quote MPC - Free Report) , Ulta Beauty Inc. ( ULTA Quick Quote ULTA - Free Report) , HF Sinclair Corp. ( DINO Quick Quote DINO - Free Report) , ShockWave Medical Inc. ( SWAV Quick Quote SWAV - Free Report) and Paylocity Holding Corp. ( PCTY Quick Quote PCTY - Free Report) . Momentum Likely to Continue
Momentum investing calls for the continued appraisal of stocks, ensuring that an investor does not pick a beaten-down name or overlook a thriving one. Momentum investors buy high on anticipation that a stock will only ascend in the short to intermediate term. Therefore, momentum stocks with a favorable Zacks Rank are likely to become an ideal combination of investments.
Moreover, the above-mentioned companies have seen positive earnings estimate revisions in the last 30 days, indicating that market participants are expecting strong business opportunities for these companies for the rest of 2022.
Out Top Picks
We have narrowed our search to five large-cap (market capital > $10 billion) momentum stocks that have solid upside left for September. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a
Momentum Score of A or B. You can see . the complete list of today’s Zacks #1 Rank stocks here
The chart below shows the price performance of our five picks in the past month.
Image Source: Zacks Investment Research Marathon Petroleum is poised for further price gains based on a slew of positives. MPC’s $21 billion sales of its Speedway retail business provided it with a much-needed cash infusion. The deal also comes with a 15-year fuel supply agreement under which Marathon Petroleum will supply 7.7 billion gallons of gasoline per year to 7-Eleven, thus ensuring a steady revenue stream.
MPC’s exposure to more stable cash flows from the logistics segment diversifies the earnings stream and offers a buffer against the volatile refining business. Consequently, Marathon Petroleum is primed for significant capital appreciation and is viewed as a preferred downstream operator to own now.
Marathon Petroleum has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last 7 days. The stock price has advanced 7.6% in the past month.
HF Sinclair operates as an independent energy company. DINO produces and markets gasoline, diesel fuel, jet fuel, renewable diesel, specialty lubricant products, specialty chemicals, specialty and modified asphalt, and others.
HF Sinclair also owns and operates refineries located in Kansas, Oklahoma, New Mexico, Utah, Washington, and Wyoming, and markets its refined products principally in the Southwest United States and Rocky Mountains, Pacific Northwest, and in other neighboring Plains states.
HF Sinclair has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 12.2% over the last 7 days. The stock price has appreciated 7.9% in the past month.
Ulta Beauty has been benefiting from its omnichannel strength. Also, the skincare category has been gaining from consumers’ rising interest in self-care. ULTA’s solid performance was backed by the strong execution of its strategies and solid guest demand, with the latter gaining from exciting brand launches.
Also, increased in-person activities and travel have been leading to the revival of the beauty category demand. All major categories delivered double-digit comp sales growth. Encouragingly, Ulta Beauty raised its fiscal 2022 view.
Ulta Beauty has an expected earnings growth rate of 18.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 5.8% over the last 7 days. The stock price has gained 6.8% in the past month.
ShockWave Medical is optimistic regarding the continued clinical acceptance and penetration of IVL, as evident from its strong results in the last reported quarter. SWAV’s results were driven by the increasing adoption of coronary IVL in the United States.
Continued sales force expansion led to growth in the United States, while improvement in international revenues over the prior year highlighted the impact of pandemic recovery and higher adoption in existing geographies.
ShockWave Medical has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 27.2% over the last 7 days. The stock price has jumped 34.4% in the past month.
Paylocity Holding is benefiting from the growing adoption of its solutions among clients with less than 50 employees. Healthy momentum in PCTY’s core and upper end of the market is a tailwind. The release of the Learning Management System and Community portal, which garnered positive feedback from clients, is encouraging.
The addition of on-demand pay to Paylocity Holding’s portfolio is likely to boost client wins going forward. PCTY’s regular investments in technological upgrades, along with product innovation, will continue to boost its top line.
Paylocity Holding has an expected earnings growth rate of 10.2% for the current year (ending June 2023). The Zacks Consensus Estimate for current-year earnings has improved 14.7% over the last 30 days. The stock price has climbed 14% in the past month.