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Analyst Blog

After a calm August followed by a shaky September one has to ponder on the idea that risks and volatility in the financial markets are merely rotational – the old ones may fade only to make place for the new ones.

With S&P 500 gaining 5% and Dow Jones gaining 3.2% over the last six months, the nvestment climate can be described as somewhat comforting for most investors. Despite the tenacious Bull Run, a nagging suspicion lingers on: How fast and how hard will volatility hit again?

Factors Driving Markets

A cacophony of global factors – both economic and political – currently signals a tough going for investors. Economic data released recently revealed that the ISM’s manufacturing index plummeted to 49.4% in September from 52.6% in August, showing the first signs of decline after a robust six months. The nominal sales data also remains unimpressive, adding to concerns.

Currently, the economy is on shaky grounds, with factors like impressive private consumption, robust labor market and rising real wages being positive drivers, while strong U.S. dollar, sore energy market and lower oil prices being spoilsports.

In addition, indecision of Fed with respect to interest rate hikes seems to be testing the mettle of the toughest investors. It seems that other major central banks are following the cue. For instance, Bank of England, European Central Bank and Bank of Japan, are largely keep their rates unaltered.

Furthermore, uncertainty related to the upcoming U.S. presidential elections is expected to be one of the major dampeners this year. While market watchers are linking Trump’s victory to be beneficial for some sectors, the Clinton clan is linking it to others. The outcome of the presidential election can bring back the wild swings on the bourse.

Hitching the Momentum Ride

Does all this volatility mean sitting on the sidelines and missing out on all the action? Well, clearly the answer should be a clear, resounding “no”, as this volatile market has a lot to offer to investors who have the appetite for it. We believe that momentum investing is one of the most successful strategies to churn out profits from volatile markets.

Today, we will discuss a particular strategy that is designed on the philosophy of “buy high and sell higher” — an idea that challenges the old school doctrine of “buy low and sell high”. It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction, instead of moving against the drift. This strategy disregards the fundamentals of the company, and leverages investors’ tendency to extrapolate current trends into the future.

Using the Zacks Style Score to Sift

Here at Zacks, we use our style score system to single out the stocks that can help you beat the market. The Zacks Momentum Style Score indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Our research shows that stocks with a Momentum Style Score of ‘A’ or ‘B’ when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential in the short term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Further, we have refined our search by considering stocks that have gained 5% over the past four weeks and still appear to have plenty of upside left. Further, these companies have been seeing positive analyst interest of late.

5 Momentum Stocks to Bet On

BHP Billiton Limited (BHP - Analyst Report) : One of the largest diversified resource companies, it has operations spanning over several continents. The Zacks Rank #2 company is involved in mineral exploration, production and processing, oil and gas exploration and development, and steel production and merchandising.

The company has seen a sharp spike in the Zacks Consensus Estimate for 2016, which now stands at $1.08, up from 95 cents a month back.

Stock Price Return: 24.73%

Momentum Score: A

Endeavour Silvr (EXK - Snapshot Report) : It is a silver mining company focused on the growth of its silver production, reserves and resources in Mexico. The Zacks Rank #2 company has a strong organic growth potential, high silver grades, substantial exploration upside of its Mexican mining properties, and the significant under-utilized capacities of the Guanacevi and Bolanitos plants.

The Zacks Consensus Estimate for 2016 earnings has trended sharply up over the past month, from 2 cents to 8 cents per share.

Stock Price Return: 17.12%

Momentum Score: A

Intrawest Resorts Holdings, Inc. (SNOW - Snapshot Report) : It is a mountain resort and adventure company which delivers vacation and travel experiences to its customers. The Zacks Rank #2 company has seen a sharp spike in the Zacks Consensus Estimate for 2016, which now stands at 60 cents, up from 28 cents a month back.

Stock Price Return: 16.78%

Momentum Score: A

Carpenter Technology Corp. (CRS - Snapshot Report) : The company is engaged in distributing specialty alloys, including stainless steel and titanium, and various engineered products. The products of this Zacks Rank #2 company are deployed in a wide range of industries, ranging from medical devices and instruments to sporting goods.

The Zacks Consensus Estimate for 2016 earnings has trended up over the past month, to $1.49 from $1.36 per share.

Stock Price Return: 19.56%

Momentum Score: A

Jabil Circuit, Inc. (JBL - Analyst Report) : It is a worldwide independent provider of electronic manufacturing services. It designs and manufactures electronic circuit board assemblies and systems for major original equipment manufacturers in the communications, computer peripherals, personal computer.

The Zacks Rank #1 company has seen an impressive spike in the Zacks Consensus Estimate for 2016, which now stands at $1.70, up from $1.62 a month back.

Stock Price Return: 20.02%

Momentum Score: A

Confidential: Zacks' Best Investment Ideas

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