We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Momentum Anomaly Stocks to Profit Amid Whimsical Market Sways
Read MoreHide Full Article
Key Takeaways
The screen highlights STX, HOOD and ECG as top picks combining long-term momentum with brief pullbacks.
The strategy selects strong 52-week performers that recently ranked among the 10 weakest one-week movers.
All three posted major annual gains but saw notable weekly declines while holding solid Momentum Scores.
The broader U.S. equity markets witnessed a topsy-turvy ride over the past few days as gains by some blue-chip tech companies were more than offset by concerns regarding the increasing valuation of AI firms. 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. Moreover, investors remain worried about whether the Federal Reserve will lower its benchmark borrowing rate at its final meeting of the year next month, with a data vacuum owing to a record government shutdown period.
The markets eagerly anticipate the September nonfarm payrolls reading (due this week) to get some cues about the economic progression and the likely Fed actions. 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 Seagate Technology Holdings plc (STX - Free Report) , Robinhood Markets, Inc. (HOOD - Free Report) and Everus Construction Group, Inc. (ECG - 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 seven stocks that made it through this screen:
Headquartered in Dublin, Ireland, Seagate is a leading provider of data storage technology and infrastructure solutions. The company’s primary product offering is hard disk drives, which are used as the primary medium for storing digitally encoded data on rapidly rotating disks with magnetic surfaces. Seagate also develops other electronic data storage products such as solid state drives and storage subsystems. Also, the company offers storage solutions like a scalable edge-to-cloud mass data platform that includes data transfer shuttles and a storage-as-a-service cloud.
The stock has surged 169.4% in the past year but declined 11.1% in the past week. Seagate has a Momentum Score of B.
Headquartered in Menlo Park, CA, Robinhood Markets is a financial services firm offering 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 jurisdictions through its apps and subsidiaries.
The stock has soared 231.3% in the past year but lost 14.6% in the past week. Robinhood Markets has a Momentum Score of A.
Headquartered in Bismarck, ND, Everus provides contracting services in the United States. It offers a full spectrum of construction services through its electrical and mechanical, and transmission and distribution specialty contracting services. These specialty contracting services are provided to utility, transportation, commercial, industrial, institutional, renewable and other customers.
The stock has jumped 46.7% in the past year but declined 13.7% in the past week. Everus 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 Profit Amid Whimsical Market Sways
Key Takeaways
The broader U.S. equity markets witnessed a topsy-turvy ride over the past few days as gains by some blue-chip tech companies were more than offset by concerns regarding the increasing valuation of AI firms. 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. Moreover, investors remain worried about whether the Federal Reserve will lower its benchmark borrowing rate at its final meeting of the year next month, with a data vacuum owing to a record government shutdown period.
The markets eagerly anticipate the September nonfarm payrolls reading (due this week) to get some cues about the economic progression and the likely Fed actions. 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 Seagate Technology Holdings plc (STX - Free Report) , Robinhood Markets, Inc. (HOOD - Free Report) and Everus Construction Group, Inc. (ECG - 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 seven stocks that made it through this screen:
Headquartered in Dublin, Ireland, Seagate is a leading provider of data storage technology and infrastructure solutions. The company’s primary product offering is hard disk drives, which are used as the primary medium for storing digitally encoded data on rapidly rotating disks with magnetic surfaces. Seagate also develops other electronic data storage products such as solid state drives and storage subsystems. Also, the company offers storage solutions like a scalable edge-to-cloud mass data platform that includes data transfer shuttles and a storage-as-a-service cloud.
The stock has surged 169.4% in the past year but declined 11.1% in the past week. Seagate has a Momentum Score of B.
Headquartered in Menlo Park, CA, Robinhood Markets is a financial services firm offering 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 jurisdictions through its apps and subsidiaries.
The stock has soared 231.3% in the past year but lost 14.6% in the past week. Robinhood Markets has a Momentum Score of A.
Headquartered in Bismarck, ND, Everus provides contracting services in the United States. It offers a full spectrum of construction services through its electrical and mechanical, and transmission and distribution specialty contracting services. These specialty contracting services are provided to utility, transportation, commercial, industrial, institutional, renewable and other customers.
The stock has jumped 46.7% in the past year but declined 13.7% in the past week. Everus 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.