The U.S. stock markets witnessed intense volatility amid global macroeconomic challenges, interest rate hikes and inflation. Central banks all over the world have increased their interest rates this year to tackle inflation.

Owing to the Santa Claus bounce, the equity markets appear to be doing well lately; last week saw the longest weekly advance since 2017 and the eighth consecutive week of gains. The uptrend was largely buoyed by the Federal Reserve’s decision to hold interest rates steady in the range of 5.25%-5.5% while pledging to cut the same several times next year. The major benchmark indices rose and approached all-time highs as a result of the highly anticipated recognition of a slowing inflation trend.

The tech-heavy Nasdaq 100 and S&P 500 have increased 51.2% and 27.1%, respectively, in the year-to-date period. The Dow Jones Industrial Average Index recently crossed the 37,000 mark on Dec 13, 2023.

It is difficult to invest in equity securities in such a turbulent market. However, investors may want to try momentum investing. Momentum buyers typically purchase a stock at a high price with the expectation that it will only rise in the near future. Momentum investing requires the necessary skills to avoid overcrowding and address volatility.

How to Identify Momentum Stocks?

Here, the Zacks Style Score can prove beneficial. The Momentum Score indicates when the timing is favorable to enter a stock to gain from the momentum with the highest probability of success.

Therefore, stocks with a good Momentum score and a favorable Zacks Rank are likely to fetch solid returns.

We have shortlisted five such momentum stocks with solid upside potential based on their market capital (> $1 billion), favorable Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Momentum Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.

In addition to the above-mentioned parameters, the shortlisted companies also have witnessed positive earnings estimate revisions in the past year. This signifies that the market participants expect healthy growth opportunities for these companies in 2024.

Image Source: Zacks Investment Research

Top Picks

Using the above parameters, we have zeroed in on five stocks — Splunk Inc. , Workday Inc. (WDAY Quick QuoteWDAY - Free Report) , NVIDIA Corporation (NVDA Quick QuoteNVDA - Free Report) , G-III Apparel Group (GIII Quick QuoteGIII - Free Report) , Casey's General Stores (CASY Quick QuoteCASY - Free Report) .

Splunk – San Francisco, CA-based SPLK provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data. The company is benefiting from high demand for its cloud solutions. The company’s business transition from perpetual licenses to subscription or renewable model is expected to benefit it in the long run. Apart from this, an aggressive acquisition strategy has played a pivotal part in developing its business over the last couple of years.

SPLK currently sports a Zacks Rank #1 and a Momentum Score of A with a market cap of $25.66 billion. The Zacks Consensus Estimate for current-year earnings has improved 73.3% over the past year to $4.28. The stock has appreciated 76.9% year to date. It has long-term earnings growth expectations of 29.6% and delivered an earnings surprise of 99.3%, on average, in the trailing four quarters.

It has an average brokerage recommendation (ABR) of 2.86 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.

Workday – Headquartered in Pleasanton, CA, WDAY has been benefiting from its cloud-based business model and expanding product portfolio.  The company’s initiatives to infuse generative AI and conversational AI features in Workday solutions also yielded positive results. Going ahead, the company is likely to benefit from the rising adoption of Workday Prism Analytics and Adaptive Insights business planning cloud offerings. The company’s cloud-based platform combines finance and HR in a single system that makes it easier for organizations to provide analytical insights and decision support.

WDAY presently carries a Zacks Rank #2 and a Momentum Score of A with a market cap of $72.05 billion. The Zacks Consensus Estimate for current-year earnings has improved 22.5% over the past year to $5.71. The stock has appreciated 63.7% year to date. It has long-term earnings growth expectations of 26.5% and delivered an earnings surprise of 13.2%, on average, in the trailing four quarters.

It has an ABR of 1.71 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.

NVIDIA Corporation – Santa Clara, CA-based, NVDA is a market leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. The company is likely to benefit from the growing demand for generative AI and large language models using GPUs based on NVIDIA Hopper and Ampere architectures.  NVDA’s A100 and H100 AI chips are used to build and run AI applications, including OpenAI's ChatGPT.

NVDA presently carries a Zacks Rank #2 and a Momentum Score of B with a market cap of $1.21 trillion. The Zacks Consensus Estimate for current-year earnings has improved 181% over the past year to $12.29. The stock price has appreciated 237.2% year to date. It has long-term earnings growth expectations of 13.5% and delivered an earnings surprise of 19%, on average, in the trailing four quarters.

It has an ABR of 1.12 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.

G-III Apparel Group – Based in New York, GIII is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. The company undertakes several strategies, including acquisitions and licensing of well-known brands, to expand its product portfolio and make itself a diversified apparel and accessories company. The company has been accelerating digital growth and strives to become the best omnichannel organization.

GIII currently sports a Zacks Rank #1 and a Momentum Score of B with a market cap of $1.55 billion. The Zacks Consensus Estimate for current-year earnings has improved 17.4% over the past year to $3.97. The stock price has appreciated 147.7% year to date.

It has an ABR of 2.66 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.

Casey's General Stores: Based in Ankeny, IA, Casey’s operates convenience stores in 16 states across the country.  The company is benefiting from strength in the prepared food and dispensed beverage category, including bakery, whole pizza pies and dispensed beverages. Also, increasing demand for non-alcoholic and alcoholic beverages in the grocery and general merchandise categories are major tailwinds.

Casey's presently sports a Zacks Rank #1 and a Momentum Score of A with a market cap of $10.12 billion. The Zacks Consensus Estimate for current-year earnings has improved 30.1% over the past year to $12.51. The stock price has appreciated 21.6% year to date. It has long-term earnings growth expectations of 10.6% and delivered an earnings surprise of 17.8%, on average, in the trailing four quarters.

It has an ABR of 1.6 on a scale of 1 to 5 (Strong Buy to Strong Sell). ABR is the calculated average of actual recommendations made by brokerage firms and portends the future potential of the stock.