For Immediate Release
Chicago, IL – September 27, 2022 – Stocks in this week’s article are Super Micro Computer, Inc. (
SMCI Quick Quote SMCI - Free Report) , NexTier Oilfield Solutions Inc. ( NEX Quick Quote NEX - Free Report) and New Fortress Energy Inc. ( NFE Quick Quote NFE - Free Report) . 3 Momentum Anomaly Picks as Latest Fed Hike Rattles Markets
The broader equity indices appeared to be shaken by the Fed's third successive 75 basis point rate hike as it vowed to continue its aggressive stance to curb inflation. The Fed even indicated that it expects to bring the so-called terminal rate to 4.6% from the current range of 3% to 3.25%. To add to the woes, the British pound hit a three-decade low against the U.S. dollar as a slew of tax cuts per a new U.K. economic plan rattled the European markets.
With uncertainty becoming the norm of the day as global recession fears increased significantly, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, "the trend is your friend." At its core, momentum investing is "buying high and selling higher." It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. But before we delve deep into it, let us try to fathom why does the momentum strategy at all work?
There are several behavioral biases that most investors exhibit in their decision-making. And these emotional responses, or rather mistakes, are the very reason that makes momentum strategy work.
For example, some investors are anxious about booking losses and hence hold on to losing stocks for too long, hopeful of a rebound in prices. On the other hand, a few investors sell their winners way too early. Momentum investing is one of the best strategies to avoid making such errors in judgment.
Furthermore, investors initially tend to underreact to news, events or data releases. However, once things become clear, they have a habit of going with the flow and overreacting, causing dramatic price reactions. These behavioral problems extend trends, thus opening up huge opportunities for momentum players.
To sum up, momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
In this context, stocks like
Super Micro Computer, Inc., NexTier Oilfield Solutions Inc. and New Fortress Energy Inc. are worth betting on.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. So, this strategy is quite tricky to implement, as detecting these trends is no child's play.
Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
Here are the three of the seven stocks that made it through this screen:
Headquartered in San Jose, CA,
Super Micro Computer develops and manufactures high-performance server and storage solutions based on modular and open architecture. Its solutions range from complete server, storage, modular blade servers, blades, workstations, full racks, networking devices, server management software, server sub-systems and security software. Super Micro Computer has gained 41.1% in the past year but declined 7.8% in the past week. It has a Momentum Score of B.
Headquartered in Houston, TX,
NexTier Oilfield Solutions provides well completion and production services in various active basins. Its integrated operations reduce fuel costs, improve efficiencies and decrease emissions. The stock has rallied 34.4% in the past year but lost 20.3% in the past week. It has a Momentum Score of A.
New Fortress Energy provides energy and development services to end-users worldwide. This energy infrastructure company owns and operates natural gas and liquefied natural gas infrastructure, ships and logistics assets to help the transition to affordable clean energy. The stock has appreciated 54.7% in the past year but declined 13% in the past week.
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 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. For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1984730/3-momentum-anomaly-picks-as-third-fed-hike-rattles-market 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.
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Contact: Jim Giaquinto
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