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Top 5 Momentum Picks for January After a Fabulous 2023
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U.S. stock markets ended 2023 on a strong note after a highly disappointing 2022. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — were up 13.7%, 23.9% and 43.4%, respectively.
The Dow recorded a new all-time high in 2023. The S&P 500 finished last year less than 0.6% below its all-time high recorded in January 2022. The Nasdaq Composite posted its best year since 2020. Moreover, all three indexes registered a nine-week-long winning streak.
Momentum Likely to Continue
U.S. stock markets soared amid a clear indication from the central bank that the current interest rate hike cycle, which elevated the Fed fund rate to a 22-year high of 5.25-5.50% from 0-0.25% in March 2022, has finally ended.
Moreover, the December FOMC meeting dot plot showed that, on average, Fed officials are expecting at least three rate cuts of 25 basis points each in 2024, followed by four more rate cuts of a full one percentage point in 2025. The dot plot also indicated three more rate cuts in 2026, which would take down the benchmark lending rate to the range of 2-2.25%.
Fed officials currently expect core inflation to fall to 3.2% in 2023, 2.4% in 2024, and then to 2.2% in 2025. Finally, it should decline to the 2% target in 2026. Despite rigorous interest rate hikes, the fundamentals of the U.S. economy remain strong.
On Jan 2, the Atlanta Fed forecast that U.S. GDP would grow by 2% in fourth-quarter 2023, a notable improvement from 1.2% estimated on Dec 7. This eliminates the fear of a recession in 2024 thereby boosting investors’ confidence in a possible soft landing for the U.S. economy.
Our Top Picks
At this stage, it will be prudent to invest in momentum stocks. We have narrowed our search to five large-cap (market capital > $10 billion) stocks that have strong momentum for January. These companies have strong potential for 2024.
The chart below shows the price performance of our five picks in the past three months.
Image Source: Zacks Investment Research
BeiGene Ltd. (BGNE - Free Report) develops and commercializes oncology medicines worldwide. BGNE’s clinical-stage drug candidates include BGB-3111, BGB-283, BGB-290, and BGB-A317. BGNE has collaborations with several large biotech companies.
BeiGene has an expected revenue and earnings growth rate of 21.7% and 15.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 27.2% over the past 60 days.
Regeneron Pharmaceuticals Inc. (REGN - Free Report) discovers, invents, develops, manufactures, and commercializes medicines for treating various diseases worldwide. REGN’s products include EYLEA injection to treat neovascular age-related macular degeneration and diabetic macular edema, myopic choroidal neovascularization, diabetic retinopathy, neovascular glaucoma, and retinopathy of prematurity.
REGN also provides Dupixent injection to treat atopic dermatitis and asthma in adults and pediatrics, Libtayo injection to treat metastatic or locally advanced cutaneous squamous cell carcinoma, Praluent injection for heterozygous familial hypercholesterolemia or clinical atherosclerotic cardiovascular disease in adults, REGEN-COV for COVID-19, and Kevzara solution for treating rheumatoid arthritis in adults.
Regeneron Pharmaceuticals has an expected revenue and earnings growth rate of 4.5% and 1.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past seven days.
Splunk Inc. is witnessing significant customer additions and multiple project wins in the public and private sectors driven by its enterprise scale and unified product portfolio. SPLK teamed up with Microsoft to enable customers to migrate, modernize and enhance their business environment with comprehensive cloud and hybrid visibility on a large scale.
Splunk is committed to enhancing its core platform and premium products with advanced AI capabilities. SPLK AI encompasses a range of AI-powered solutions that seamlessly blend automation with human input.
Splunk has an expected revenue and earnings growth rate of 11.1% and 6.8%, respectively, for next year (ending January 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.1% over the past 60 days.
Casey's General Stores Inc. (CASY - Free Report) reported impressive results for second-quarter fiscal 2024. CASY’s stellar performance in prepared food and grocery categories helped post a 6.2% jump in inside sales and 2.9% growth in inside same-store sales in the quarter. Its business operating model, omnichannel capabilities, enhanced customer reach and private-label offerings reinforce its position in the industry.
Casey's price and product optimization strategies, increased penetration of private brands and digital engagements are also commendable. CASY’s inventory management, technology advancements and data analytics position it well for future growth.
Casey's General Stores has an expected revenue and earnings growth rate of 0.3% and 7.4%, respectively, for the current year (ending April 2024). The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 30 days.
Shopify Inc. (SHOP - Free Report) is benefiting from strong growth in the merchant base. SHOP has been focused on winning merchants regularly based on product offerings, including Shop Pay and Shop Pay Installments. The solid adoption of new merchant-friendly applications holds promise.
Partnerships with YouTube, Twitter, Facebook, Instagram, and Google are expected to expand SHOP’s merchant base. The divestiture of the logistics business to Flexport is likely to boost profitability going forward.
Shopify has an expected revenue and earnings growth rate of 19% and 48.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 33.3% over the past 60 days.
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Top 5 Momentum Picks for January After a Fabulous 2023
U.S. stock markets ended 2023 on a strong note after a highly disappointing 2022. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — were up 13.7%, 23.9% and 43.4%, respectively.
The Dow recorded a new all-time high in 2023. The S&P 500 finished last year less than 0.6% below its all-time high recorded in January 2022. The Nasdaq Composite posted its best year since 2020. Moreover, all three indexes registered a nine-week-long winning streak.
Momentum Likely to Continue
U.S. stock markets soared amid a clear indication from the central bank that the current interest rate hike cycle, which elevated the Fed fund rate to a 22-year high of 5.25-5.50% from 0-0.25% in March 2022, has finally ended.
Moreover, the December FOMC meeting dot plot showed that, on average, Fed officials are expecting at least three rate cuts of 25 basis points each in 2024, followed by four more rate cuts of a full one percentage point in 2025. The dot plot also indicated three more rate cuts in 2026, which would take down the benchmark lending rate to the range of 2-2.25%.
Fed officials currently expect core inflation to fall to 3.2% in 2023, 2.4% in 2024, and then to 2.2% in 2025. Finally, it should decline to the 2% target in 2026. Despite rigorous interest rate hikes, the fundamentals of the U.S. economy remain strong.
On Jan 2, the Atlanta Fed forecast that U.S. GDP would grow by 2% in fourth-quarter 2023, a notable improvement from 1.2% estimated on Dec 7. This eliminates the fear of a recession in 2024 thereby boosting investors’ confidence in a possible soft landing for the U.S. economy.
Our Top Picks
At this stage, it will be prudent to invest in momentum stocks. We have narrowed our search to five large-cap (market capital > $10 billion) stocks that have strong momentum for January. These companies have strong potential for 2024.
These stocks have seen positive earnings estimate revisions in the past 60 days. 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 three months.
Image Source: Zacks Investment Research
BeiGene Ltd. (BGNE - Free Report) develops and commercializes oncology medicines worldwide. BGNE’s clinical-stage drug candidates include BGB-3111, BGB-283, BGB-290, and BGB-A317. BGNE has collaborations with several large biotech companies.
BeiGene has an expected revenue and earnings growth rate of 21.7% and 15.5%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 27.2% over the past 60 days.
Regeneron Pharmaceuticals Inc. (REGN - Free Report) discovers, invents, develops, manufactures, and commercializes medicines for treating various diseases worldwide. REGN’s products include EYLEA injection to treat neovascular age-related macular degeneration and diabetic macular edema, myopic choroidal neovascularization, diabetic retinopathy, neovascular glaucoma, and retinopathy of prematurity.
REGN also provides Dupixent injection to treat atopic dermatitis and asthma in adults and pediatrics, Libtayo injection to treat metastatic or locally advanced cutaneous squamous cell carcinoma, Praluent injection for heterozygous familial hypercholesterolemia or clinical atherosclerotic cardiovascular disease in adults, REGEN-COV for COVID-19, and Kevzara solution for treating rheumatoid arthritis in adults.
Regeneron Pharmaceuticals has an expected revenue and earnings growth rate of 4.5% and 1.9%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.3% over the past seven days.
Splunk Inc. is witnessing significant customer additions and multiple project wins in the public and private sectors driven by its enterprise scale and unified product portfolio. SPLK teamed up with Microsoft to enable customers to migrate, modernize and enhance their business environment with comprehensive cloud and hybrid visibility on a large scale.
Splunk is committed to enhancing its core platform and premium products with advanced AI capabilities. SPLK AI encompasses a range of AI-powered solutions that seamlessly blend automation with human input.
Splunk has an expected revenue and earnings growth rate of 11.1% and 6.8%, respectively, for next year (ending January 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.1% over the past 60 days.
Casey's General Stores Inc. (CASY - Free Report) reported impressive results for second-quarter fiscal 2024. CASY’s stellar performance in prepared food and grocery categories helped post a 6.2% jump in inside sales and 2.9% growth in inside same-store sales in the quarter. Its business operating model, omnichannel capabilities, enhanced customer reach and private-label offerings reinforce its position in the industry.
Casey's price and product optimization strategies, increased penetration of private brands and digital engagements are also commendable. CASY’s inventory management, technology advancements and data analytics position it well for future growth.
Casey's General Stores has an expected revenue and earnings growth rate of 0.3% and 7.4%, respectively, for the current year (ending April 2024). The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 30 days.
Shopify Inc. (SHOP - Free Report) is benefiting from strong growth in the merchant base. SHOP has been focused on winning merchants regularly based on product offerings, including Shop Pay and Shop Pay Installments. The solid adoption of new merchant-friendly applications holds promise.
Partnerships with YouTube, Twitter, Facebook, Instagram, and Google are expected to expand SHOP’s merchant base. The divestiture of the logistics business to Flexport is likely to boost profitability going forward.
Shopify has an expected revenue and earnings growth rate of 19% and 48.1%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 33.3% over the past 60 days.