After a solid start to the year, with record highs on several occasions, the broader U.S. equity markets nosedived due to potent threats from President Donald Trump that renewed fears of geopolitical instability. With Trump insisting on acquiring Greenland, several European Union (EU) countries have deployed military support to counter any act of aggression, potentially escalating into a larger conflict. To add to the woes, the U.S. government threatened to impose hefty tariffs on EU nations for not falling in line, forcing the latter to consider imposing a ‘trade bazooka’ as a likely deterrent.  

With continued unrest in Iran, the sudden turn of events has led to a cacophony, triggering a downslide in the equity markets. This, in turn, is likely to cloud the earnings season, which has got off to a modest start with the banking stocks. 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 Kohl's Corporation (KSS Quick QuoteKSS - Free Report) , Albemarle Corporation (ALB Quick QuoteALB - Free Report) and Alcoa Corporation (AA Quick QuoteAA - 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 nine stocks that made it through this screen:

Headquartered in Menomonee Falls, WI, Kohl’s operates specialty department stores and an e-commerce site in the United States, offering discounted apparel, footwear and accessories for women, men and children. The product portfolio comprises both national brands and private label clothing and home goods, along with some exclusive brands that are available only at Kohl's. 

The stock has jumped 43.2% in the past year but declined 5.7% in the past week. Kohl’s has a Momentum Score of A.

Charlotte, NC-based Albemarle is a premier specialty chemicals firm, focusing on highly-engineered specialty chemicals used for petroleum refining, consumer electronics, energy storage, construction and automotive. It offers high-quality lithium and bromine solutions for various use cases across diverse industries.

The stock has soared 67.2% in the past year but lost 3.7% in the past week. Albemarle has a Momentum Score of A.

Headquartered in Pittsburgh, PA, Alcoa engages in active mining of bauxite and other aluminous ores. It also generates electricity that is sold to large industrial consumers, distribution firms and other power generation companies.

The stock has soared 52% in the past year but lost 8.5% in the past week. Alcoa has a Momentum Score of A.