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3 Momentum Anomaly Picks as Markets Wobble on Fresh Tariff Salvo
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The broader U.S. equity markets have witnessed a steady downtrend over the past couple of days as President Trump reignited the tariff war with a slew of proposed tariffs on imported goods from 14 countries, including major trading partners and allies, Japan and South Korea. The charges are scheduled to be levied from August, with more countries likely to be added to the list in the coming days. Although the doors are kept wide open for negotiations, the sudden shift in the tariff policy has led to heightened market uncertainty, financial market turmoil and sent policymakers scrambling to protect their economies.
Amid the vagaries of the market and related uncertainty, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks, like Urban Outfitters, Inc. (URBN - Free Report) , Royal Gold, Inc. (RGLD - Free Report) and Kodiak Gas Services, Inc. (KGS - Free Report) when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. So, this strategy is quite tricky to implement, as detecting these trends is no child’s play. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
Screening Parameters for Momentum Anomaly Stocks
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform other stocks.
Current Price greater than $5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure the stability of price.
Average 20-Day Volume greater than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three stocks out of the seven that made it through this screen:
Based in Philadelphia, PA, Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. The company’s merchandise is generally sold directly to consumers through stores, catalogs, call centers and e-commerce platforms. Urban Outfitters has operations in the United States, Canada and Europe. The stock has surged 63.6% in the past year but declined 4.2% in the past week. Urban Outfitters has a Momentum Score of B.
Based in Denver, CO, Royal Gold acquires and manages precious metals stream and royalty interests, with a primary focus on gold. The company generates strong cash flows from a large and well-diversified portfolio of precious metal streams, royalties and similar production-based interests located in mining-friendly jurisdictions. The stock has rallied 22% in the past year but lost 9.8% in the past week. Royal Gold has a Momentum Score of A.
Headquartered in The Woodlands, TX, Kodiak Gas Services operates contract compression infrastructure for customers in the oil and gas industry in the United States. It provides services to oil and gas producers and midstream customers in high–volume gas gathering systems, processing facilities, multi-well gas lift applications and natural gas transmission systems, serving as a critical link in the infrastructure that enables the safe and reliable production and transportation of natural gas and oil. The stock has surged 25.3% in the past year but declined 3.8% in the past week. Kodiak Gas Services has a Momentum Score of A.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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.
Image: Bigstock
3 Momentum Anomaly Picks as Markets Wobble on Fresh Tariff Salvo
The broader U.S. equity markets have witnessed a steady downtrend over the past couple of days as President Trump reignited the tariff war with a slew of proposed tariffs on imported goods from 14 countries, including major trading partners and allies, Japan and South Korea. The charges are scheduled to be levied from August, with more countries likely to be added to the list in the coming days. Although the doors are kept wide open for negotiations, the sudden shift in the tariff policy has led to heightened market uncertainty, financial market turmoil and sent policymakers scrambling to protect their economies.
Amid the vagaries of the market and related uncertainty, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks, like Urban Outfitters, Inc. (URBN - Free Report) , Royal Gold, Inc. (RGLD - Free Report) and Kodiak Gas Services, Inc. (KGS - Free Report) when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. So, this strategy is quite tricky to implement, as detecting these trends is no child’s play. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
Screening Parameters for Momentum Anomaly Stocks
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Zacks Rank #1: Stocks sporting a Zacks Rank #1 (Strong Buy) have a proven history of outperformance irrespective of the market conditions. You can see the complete list of today’s Zacks #1 Rank stocks here.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform other stocks.
Current Price greater than $5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure the stability of price.
Average 20-Day Volume greater than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three stocks out of the seven that made it through this screen:
Based in Philadelphia, PA, Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home décor and gift products. The company’s merchandise is generally sold directly to consumers through stores, catalogs, call centers and e-commerce platforms. Urban Outfitters has operations in the United States, Canada and Europe. The stock has surged 63.6% in the past year but declined 4.2% in the past week. Urban Outfitters has a Momentum Score of B.
Based in Denver, CO, Royal Gold acquires and manages precious metals stream and royalty interests, with a primary focus on gold. The company generates strong cash flows from a large and well-diversified portfolio of precious metal streams, royalties and similar production-based interests located in mining-friendly jurisdictions. The stock has rallied 22% in the past year but lost 9.8% in the past week. Royal Gold has a Momentum Score of A.
Headquartered in The Woodlands, TX, Kodiak Gas Services operates contract compression infrastructure for customers in the oil and gas industry in the United States. It provides services to oil and gas producers and midstream customers in high–volume gas gathering systems, processing facilities, multi-well gas lift applications and natural gas transmission systems, serving as a critical link in the infrastructure that enables the safe and reliable production and transportation of natural gas and oil. The stock has surged 25.3% in the past year but declined 3.8% in the past week. Kodiak Gas Services has a Momentum Score of A.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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.