Momentum investing revolves around the idea of following a stock's recent trend in either direction. In the 'long' context, investors will be essentially be "buying high, but hoping to sell even higher." With this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving that way. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.
While many investors like to look for momentum in stocks, this can be very tough to define. There is a lot of debate surrounding which metrics are the best to focus on and which are poor quality indicators of future performance. The Zacks Momentum Style Score, part of the
Zacks Style Scores, helps address this issue for us.
Below, we take a look at
CBOE Global (, a company that currently holds a Momentum Style Score of B. We also talk about price change and earnings estimate revisions, two of the main aspects of the Momentum Style Score. CBOE Quick Quote CBOE - Free Report)
It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. CBOE Global currently has a Zacks Rank of #1 (Strong Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.
You can see the current list of
Zacks #1 Rank Stocks here >>> Set to Beat the Market?
In order to see if CBOE is a promising momentum pick, let's examine some Momentum Style elements to see if this holding company for the Chicago Board Options Exchange holds up.
A good momentum benchmark for a stock is to look at its short-term price activity, as this can reflect both current interest and if buyers or sellers currently have the upper hand. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.
For CBOE, shares are up 1.92% over the past week while the Zacks Securities and Exchanges industry is up 2.3% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 11.91% compares favorably with the industry's 11.72% performance as well.
While any stock can see its price increase, it takes a real winner to consistently beat the market. That is why looking at longer term price metrics -- such as performance over the past three months or year -- can be useful as well. Shares of CBOE Global have increased 18.64% over the past quarter, and have gained 43.66% in the last year. On the other hand, the S&P 500 has only moved 1.7% and 13.63%, respectively.
Investors should also take note of CBOE's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. Right now, CBOE is averaging 856,623 shares for the last 20 days.
The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with CBOE.
Over the past two months, 7 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost CBOE's consensus estimate, increasing from $7.28 to $7.58 in the past 60 days. Looking at the next fiscal year, 8 estimates have moved upwards while there have been no downward revisions in the same time period.
Taking into account all of these elements, it should come as no surprise that CBOE is a #1 (Strong Buy) stock with a Momentum Score of B. If you've been searching for a fresh pick that's set to rise in the near-term, make sure to keep CBOE Global on your short list.