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3 Momentum Anomaly Picks as Markets Hit Record High on the Trot
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Key Takeaways
NFLX surged 86.2% in a year but dipped 7.3% last week, earning a Momentum Score of A.
HOOD soared 381.3% over 12 months but slipped 3.3% in the past week, with a Momentum Score of A.
AFRM gained 148.7% annually and fell 5.2% weekly, holding a Momentum Score of B.
The broader U.S. equity markets scripted history by continuously hitting record highs over the past few days, buoyed by strong quarterly earnings performance from hitherto-reported firms across all sectors. In particular, solid earnings from blue-chip technology stocks that portrayed the growing clout of AI infrastructure spending induced positive investor sentiments. Moreover, renewed trade deals between the United States and its trading partners for a mutually beneficial tariff policy boosted the markets. Investors now await further clarity on the interest rate cuts with the Federal Reserve slated to meet next week.
Amid the vagaries of the market, 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 Netflix, Inc. (NFLX - Free Report) , Robinhood Markets, Inc. (HOOD - Free Report) and Affirm Holdings, Inc. (AFRM - 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 five that made it through this screen:
Los Gatos, CA-based Netflix is considered a pioneer in the streaming space. The company has evolved from a small DVD-rental provider to a dominant streaming service provider, courtesy of its wide-ranging content portfolio and a fortified international footprint. Netflix streams movies, television shows and documentaries across a wide variety of genres and languages. Domestic and international subscribers can watch them on a host of Internet-connected devices, including television sets, computers and mobile devices. The stock has surged 86.2% in the past year but declined 7.3% in the past week. Netflix has a Momentum Score of A.
Headquartered in Menlo Park, CA, Robinhood Markets is a financial services company that offers trading services in crypto, stocks, options, exchange-traded funds, cash management, margin and securities lending and Robinhood Gold. The company aims to democratize finance through its commission-free trading model, which was launched in 2013, with no account minimums. The company serves in the United States, the United Kingdom and selected European Union (EU) jurisdictions through its apps and subsidiaries. The stock has rallied 381.3% in the past year but lost 3.3% in the past week. Robinhood Markets has a Momentum Score of A.
Headquartered in San Francisco, CA, Affirm is a financial technology firm specializing in payment solutions that provide consumers with flexible, transparent installment loans — both interest-free and interest-bearing — at the point of sale. By partnering with a diverse range of merchants, Affirm enables customers to pay for purchases over time. The stock has surged 148.7% in the past year but declined 5.2% in the past week. Affirm has a Momentum Score of B.
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: Shutterstock
3 Momentum Anomaly Picks as Markets Hit Record High on the Trot
Key Takeaways
The broader U.S. equity markets scripted history by continuously hitting record highs over the past few days, buoyed by strong quarterly earnings performance from hitherto-reported firms across all sectors. In particular, solid earnings from blue-chip technology stocks that portrayed the growing clout of AI infrastructure spending induced positive investor sentiments. Moreover, renewed trade deals between the United States and its trading partners for a mutually beneficial tariff policy boosted the markets. Investors now await further clarity on the interest rate cuts with the Federal Reserve slated to meet next week.
Amid the vagaries of the market, 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 Netflix, Inc. (NFLX - Free Report) , Robinhood Markets, Inc. (HOOD - Free Report) and Affirm Holdings, Inc. (AFRM - 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 five that made it through this screen:
Los Gatos, CA-based Netflix is considered a pioneer in the streaming space. The company has evolved from a small DVD-rental provider to a dominant streaming service provider, courtesy of its wide-ranging content portfolio and a fortified international footprint. Netflix streams movies, television shows and documentaries across a wide variety of genres and languages. Domestic and international subscribers can watch them on a host of Internet-connected devices, including television sets, computers and mobile devices. The stock has surged 86.2% in the past year but declined 7.3% in the past week. Netflix has a Momentum Score of A.
Headquartered in Menlo Park, CA, Robinhood Markets is a financial services company that offers trading services in crypto, stocks, options, exchange-traded funds, cash management, margin and securities lending and Robinhood Gold. The company aims to democratize finance through its commission-free trading model, which was launched in 2013, with no account minimums. The company serves in the United States, the United Kingdom and selected European Union (EU) jurisdictions through its apps and subsidiaries. The stock has rallied 381.3% in the past year but lost 3.3% in the past week. Robinhood Markets has a Momentum Score of A.
Headquartered in San Francisco, CA, Affirm is a financial technology firm specializing in payment solutions that provide consumers with flexible, transparent installment loans — both interest-free and interest-bearing — at the point of sale. By partnering with a diverse range of merchants, Affirm enables customers to pay for purchases over time. The stock has surged 148.7% in the past year but declined 5.2% in the past week. Affirm has a Momentum Score of B.
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.