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Seagate & Another AI Memory Momentum Stock With Big Upside
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Key Takeaways
STX and WDC passed a momentum screen from a universe of more than 7,743 stocks.
Seagate has a Momentum Score of B and expects 84.3% earnings growth this year.
WDC posted an 11.6% average earnings surprise and projects 103.9% growth this year.
Investors seeking outsized returns should focus on high-momentum stocks. To identify stocks with continued upside, they can adopt Richard Driehaus’s well-known “buy high and sell higher” approach, which secured him a place on Barron’s All-Century Team.
Using the Driehaus momentum-investing approach, artificial intelligence (AI) memory stocks, Seagate Technology Holdings plc (STX - Free Report) and Western Digital Corporation (WDC - Free Report) have emerged as strong momentum candidates and potentially attractive entry points for investors. These stocks are gaining because the AI boom is accelerating data center expansion, driving strong demand for large-scale, cost-efficient data storage solutions.
Inside the Driehaus Strategy: A Guide to Momentum Investing
Regarding the strategy, Driehaus once said: “I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in decline and try to guess when it will turn around.” In line with this insight, the American Association of Individual Investors (“AAII”) considered the 50-day moving average one of the key criteria when creating a portfolio in line with Driehaus’ philosophy.
It is calculated by dividing the numerator (month-end price minus 50-day moving average of month-end price) by the 50-day moving average of the month-end price. Another momentum indicator — positive relative strength — has also been included in this strategy. A positive percentage 50-day moving average indicates that the stock is trading above its 50-day moving average, signaling an uptrend.
Moreover, AAII found that Driehaus primarily focuses on strong earnings growth rates and impressive earnings projections to pick potential outperformers. Companies with a strong history of beating estimates are also prioritized in this strategy, which was designed to deliver better long-term returns.
Research Wizard Screening Parameters
To make the strategy more profitable, we have considered only stocks with a Zacks Rank #1 (Strong Buy) and a Momentum Score of A or B. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1, offer the best upside potential.
Strong EPS growth history ensures an improving business
• Trailing 12-month EPS growth greater than 0 and industry median
Higher EPS growth compared to the industry average indicates superior earnings performance
• Last four-quarter average EPS surprise greater than 5%
Solid EPS surprise history indicates better price performance
• Positive percentage change in 50-day moving average and relative strength over 4 weeks
Positive percentage change in the 50-day moving average and the relative strength signal uptrend
• Momentum Score equal to or less than B
A favorable momentum score indicates that it is ideal to capitalize on the momentum with the highest probability of success.
These few parameters have narrowed the universe of more than 7,743 stocks to only 18.
Here are the top two stocks:
Seagate Technology
Seagate Technology provides data storage technology and infrastructure solutions across global markets, including Singapore, the United States and the Netherlands. It has a Momentum Score of B. The trailing four-quarter earnings surprise for STX is 10.7%, on average. The company’s expected earnings growth rate for the current year is 84.3% (read more: Micron & Another AI Memory Stock to Buy Now for Big Upside).
Western Digital
Western Digital designs and sells hard disk drive-based data storage solutions across the United States, Asia, Europe, the Middle East and Africa. It has a Momentum Score of B. The trailing four-quarter earnings surprise for WDC is 11.6%, on average. The company’s expected earnings growth rate for the current year is 103.9%.
View the Zacks #1 Rank List
Image: Bigstock
Seagate & Another AI Memory Momentum Stock With Big Upside
Key Takeaways
Investors seeking outsized returns should focus on high-momentum stocks. To identify stocks with continued upside, they can adopt Richard Driehaus’s well-known “buy high and sell higher” approach, which secured him a place on Barron’s All-Century Team.
Using the Driehaus momentum-investing approach, artificial intelligence (AI) memory stocks, Seagate Technology Holdings plc (STX - Free Report) and Western Digital Corporation (WDC - Free Report) have emerged as strong momentum candidates and potentially attractive entry points for investors. These stocks are gaining because the AI boom is accelerating data center expansion, driving strong demand for large-scale, cost-efficient data storage solutions.
Inside the Driehaus Strategy: A Guide to Momentum Investing
Regarding the strategy, Driehaus once said: “I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in decline and try to guess when it will turn around.” In line with this insight, the American Association of Individual Investors (“AAII”) considered the 50-day moving average one of the key criteria when creating a portfolio in line with Driehaus’ philosophy.
It is calculated by dividing the numerator (month-end price minus 50-day moving average of month-end price) by the 50-day moving average of the month-end price. Another momentum indicator — positive relative strength — has also been included in this strategy. A positive percentage 50-day moving average indicates that the stock is trading above its 50-day moving average, signaling an uptrend.
Moreover, AAII found that Driehaus primarily focuses on strong earnings growth rates and impressive earnings projections to pick potential outperformers. Companies with a strong history of beating estimates are also prioritized in this strategy, which was designed to deliver better long-term returns.
Research Wizard Screening Parameters
To make the strategy more profitable, we have considered only stocks with a Zacks Rank #1 (Strong Buy) and a Momentum Score of A or B. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1, offer the best upside potential.
• Zacks Rank equal to #1
No matter whether the market is good or bad, stocks with a Zacks Rank #1 have a proven history of outperformance. You can see the complete list of today’s Zacks #1 Rank stocks here.
• Last 5-year average EPS growth rates above 2%
Strong EPS growth history ensures an improving business
• Trailing 12-month EPS growth greater than 0 and industry median
Higher EPS growth compared to the industry average indicates superior earnings performance
• Last four-quarter average EPS surprise greater than 5%
Solid EPS surprise history indicates better price performance
• Positive percentage change in 50-day moving average and relative strength over 4 weeks
Positive percentage change in the 50-day moving average and the relative strength signal uptrend
• Momentum Score equal to or less than B
A favorable momentum score indicates that it is ideal to capitalize on the momentum with the highest probability of success.
These few parameters have narrowed the universe of more than 7,743 stocks to only 18.
Here are the top two stocks:
Seagate Technology
Seagate Technology provides data storage technology and infrastructure solutions across global markets, including Singapore, the United States and the Netherlands. It has a Momentum Score of B. The trailing four-quarter earnings surprise for STX is 10.7%, on average. The company’s expected earnings growth rate for the current year is 84.3% (read more: Micron & Another AI Memory Stock to Buy Now for Big Upside).
Western Digital
Western Digital designs and sells hard disk drive-based data storage solutions across the United States, Asia, Europe, the Middle East and Africa. It has a Momentum Score of B. The trailing four-quarter earnings surprise for WDC is 11.6%, on average. The company’s expected earnings growth rate for the current year is 103.9%.