Richard Driehaus earned a place in Barron’s All-Century Team due to the Driehaus strategy, or the “buy high and sell higher" theory, which is undeniably an efficacious investment approach. The Driehaus strategy can be applied to choose the best momentum stocks.
To that end, stocks like
Ralph Lauren ( RL Quick Quote RL - Free Report) , The New York Times Company ( NYT Quick Quote NYT - Free Report) , Amazon.com ( AMZN Quick Quote AMZN - Free Report) , and Meta Platforms ( META Quick Quote META - Free Report) have been selected as the momentum picks for the day using the Driehaus strategy. A Detailed Look Into the Driehaus Strategy
Regarding the strategy, Driehaus once said: “I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in decline and try to guess when it will turn around.” In line with this insight, the American Association of Individual Investors (“AAII”) considered the percentage 50-day moving average as one of the key criteria before creating a portfolio following Driehaus’ philosophy.
It is calculated by dividing the numerator (month-end price minus 50-day moving average of month-end price) by the 50-day moving average of the month-end price. Another momentum indicator — positive relative strength — has also been included in this strategy. A positive percentage 50-day moving average indicates that the stock is trading at a price higher than its 50-day moving average level, indicating an uptrend.
Moreover, AAII found that Driehaus primarily focuses on strong earnings growth rates and impressive earnings projections to pick potential outperformers. Companies with a strong history of beating estimates are also given importance in this strategy, which was made to provide better returns over the long term.
To make the strategy more profitable, we have considered only those stocks that have a Zacks Rank #1 (Strong Buy) and a Momentum Score of A or B. Our research shows that stocks with a
Style Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Zacks Rank equal to #1
Whether the market is good or bad, stocks with a Zacks Rank #1 have a proven history of outperformance. You can see
the complete list of today’s Zacks #1 Rank stocks here.
Last 5-year average EPS growth rates above 2%
Strong EPS growth history ensures improving business
Trailing 12-month EPS growth greater than 0 and industry median
Higher EPS growth compared to the industry average indicates superior earnings performance
Last four-quarter average EPS surprise greater than 5%
Solid EPS surprise history indicates better price performance
Positive percentage change in 50-day moving average and relative strength over 4 weeks
Positive percentage change in 50-day moving average and relative strength signal uptrend
Momentum Score equal to or less than B
A favorable momentum score indicates that it is ideal for taking advantage of the momentum with the highest probability of success.
These few parameters have narrowed the universe of more than 7,743 stocks to only 19.
Here are four of the 19 stocks:
Ralph Lauren is a major designer, marketer and distributor of premium lifestyle products. It has a Momentum Score of A. The trailing four-quarter earnings surprise for RL is 18.7%, on average. The New York Times Company operates as a diversified media company. It has a Momentum Score of B. The trailing four-quarter earnings surprise for NYT is 36%, on average. Amazon.com is one of the largest e-commerce providers. It has a Momentum Score of A. The trailing four-quarter earnings surprise for AMZN is 51%, on average. Meta Platforms is the world's largest social media platform. It has a Momentum Score of A. The trailing four-quarter earnings surprise for META is 19.7%, on average.
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Click here to sign up for a free trial to the Research Wizard today. 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. Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance.