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3 Momentum Anomaly Stocks to Buy as AI Growth Stokes Concern
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Key Takeaways
Shopify, Boot Barn and Reddit emerge as strong momentum picks amid volatile AI-driven markets.
SHOP surged 102.3% in a year; BOOT gained 42%; RDDT climbed 53.2%, each showing brief pullbacks.
All three stocks hold top Momentum Scores, signaling solid trends despite short-term market weakness.
The broader U.S. equity markets have witnessed a roller coaster ride over the past few days. This was due to strong quarterly performances by some blue-chip tech companies on one hand and concerns regarding the increasing valuation of AI firms on the other. Industry experts widely expect that growth in AI firms would not be commensurate with hefty investments, leading to a market correction in the near term.
To add to the woes, the U.S. government shutdown entered a record 36th day and began to weigh on investor sentiments as uncertainty over the resumption of normal federal operations dragged the shares and compounded market volatility. However, a better-than-expected start to the earnings season, with solid performance by tech companies, helped to revive some of the lost sheen. 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 Shopify Inc. (SHOP - Free Report) , Boot Barn Holdings, Inc. (BOOT - Free Report) and Reddit, Inc. (RDDT - 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. Therefore, 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 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 of the five stocks that made it through this screen:
Ottawa, Canada-based Shopify is a leading global commerce platform that helps in starting, scaling, marketing and running a business of any size. Its platform and services are engineered for simplicity and reliability, while delivering a better shopping experience for customers everywhere. Merchants use the company’s comprehensive, multi-channel commerce platform to run business across various sales channels, including web and mobile storefronts, physical retail locations, social media storefronts and marketplaces.
The stock has surged 102.3% in the past year but declined 10.1% in the past week. Shopify has a Momentum Score of B.
Based in Irvine, CA, Boot Barn operates specialty retail stores in the United States and internationally. It offers western and work-related footwear, apparel and accessories for men, women and kids. These include boots, shirts, jackets, hats, belts and belt buckles, handbags, western-style jewelry, rugged footwear, outerwear, overalls, denim, safety-toe boots and flame-resistant and high-visibility clothing, as well as gifts and home merchandise under the Shyanne, Cody James, Moonshine Spirit, Idyllwind, Hawx, Cody James Work, Cleo + Wolf, Brothers & Sons, Rank 45, Blue Ranchwear, and Cody James Black 1978 brands.
The stock has soared 42% in the past year but lost 6.9% in the past week. Boot Barn has a Momentum Score of A.
Headquartered in San Francisco, Reddit is a social media and community-led platform that enables real-time discovery, conversation and engagement across a wide range of interest-based forums. The platform’s open-access design allows most content to be discovered through search engines and other referring sources while supporting both signed-in and anonymous participation, driving scalable and high-intent user engagement. Reddit serves global audiences across verticals, including gaming, consumer tech, finance, health, education and entertainment. Reddit’s content architecture and engagement model are designed to support safe, trusted and interest-based interactions at scale.
The stock has jumped 53.2% in the past year but declined 11.8% in the past week. Reddit 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 Stocks to Buy as AI Growth Stokes Concern
Key Takeaways
The broader U.S. equity markets have witnessed a roller coaster ride over the past few days. This was due to strong quarterly performances by some blue-chip tech companies on one hand and concerns regarding the increasing valuation of AI firms on the other. Industry experts widely expect that growth in AI firms would not be commensurate with hefty investments, leading to a market correction in the near term.
To add to the woes, the U.S. government shutdown entered a record 36th day and began to weigh on investor sentiments as uncertainty over the resumption of normal federal operations dragged the shares and compounded market volatility. However, a better-than-expected start to the earnings season, with solid performance by tech companies, helped to revive some of the lost sheen. 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 Shopify Inc. (SHOP - Free Report) , Boot Barn Holdings, Inc. (BOOT - Free Report) and Reddit, Inc. (RDDT - 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. Therefore, 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 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 of the five stocks that made it through this screen:
Ottawa, Canada-based Shopify is a leading global commerce platform that helps in starting, scaling, marketing and running a business of any size. Its platform and services are engineered for simplicity and reliability, while delivering a better shopping experience for customers everywhere. Merchants use the company’s comprehensive, multi-channel commerce platform to run business across various sales channels, including web and mobile storefronts, physical retail locations, social media storefronts and marketplaces.
The stock has surged 102.3% in the past year but declined 10.1% in the past week. Shopify has a Momentum Score of B.
Based in Irvine, CA, Boot Barn operates specialty retail stores in the United States and internationally. It offers western and work-related footwear, apparel and accessories for men, women and kids. These include boots, shirts, jackets, hats, belts and belt buckles, handbags, western-style jewelry, rugged footwear, outerwear, overalls, denim, safety-toe boots and flame-resistant and high-visibility clothing, as well as gifts and home merchandise under the Shyanne, Cody James, Moonshine Spirit, Idyllwind, Hawx, Cody James Work, Cleo + Wolf, Brothers & Sons, Rank 45, Blue Ranchwear, and Cody James Black 1978 brands.
The stock has soared 42% in the past year but lost 6.9% in the past week. Boot Barn has a Momentum Score of A.
Headquartered in San Francisco, Reddit is a social media and community-led platform that enables real-time discovery, conversation and engagement across a wide range of interest-based forums. The platform’s open-access design allows most content to be discovered through search engines and other referring sources while supporting both signed-in and anonymous participation, driving scalable and high-intent user engagement. Reddit serves global audiences across verticals, including gaming, consumer tech, finance, health, education and entertainment. Reddit’s content architecture and engagement model are designed to support safe, trusted and interest-based interactions at scale.
The stock has jumped 53.2% in the past year but declined 11.8% in the past week. Reddit 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.