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5 Best Momentum Stocks to Buy Using Driehaus Strategy
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Driehaus strategy is considered as one of the finest investment approaches for individuals, who have the propensity to take higher risk. Investors can easily chose momentum stocks using this particular strategy to get high returns. This investment strategy was developed by Richard Herman Driehaus using the buy high and sell higher principle. The success of this strategy ultimately helped Driehaus secure a place in Barron’s All-Century Team.
The American Association of Individual Investors (AAII) proved that the strategy has the potential to offer high returns. AAII’s portfolio, which was developed following the strategy, returned 13.5% and 18.1% in the five and 10-year time frames, respectively, compared with -1.1% and 4.2% returns registered by the S&P 500. Thus, investors with a high risk appetite might give the Driehaus strategy a thought to boost returns.
A Brief Note on Driehaus’ Strategy
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 a decline and try to guess when it will turn around.” In keeping with his insight, AAII took into account the percentage 50-day moving average as one of the key criteria before designing a portfolio.
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. A positive percentage 50-day moving average indicates that the stock is trading at a price higher than its 50-day moving average level, indicating an uptrend.
Moreover, AAII found that Driehaus primarily focused on strong earnings growth rates and impressive earnings projections to pick potential outperformers. Companies with a strong history of beating estimates are also given importance in this strategy, which was made to provide better returns over the long term.
Screening Parameters
Our research shows that stocks with a Zacks Rank #1 or 2 (Buy) and a Momentum Score of A or B offer the best upside potential.
(Strong EPS growth history ensures improving business.)
• Trailing 12 month EPS growth higher than 0 and industry median
(Higher EPS growth compared to the industry average indicates superior stocks.)
• Last four-quarter average EPS surprise greater than 5%
(Positive EPS surprise indicates potential.)
• Positive % 50-day moving average and relative strength over 4 weeks
(High % 50-day moving average and relative strength signal uptrend.)
• Momentum Score equal to or less than B
(Ideal for taking advantage of momentum with the highest probability of success.)
These few parameters narrowed down the universe of over 7,904 stocks to only 16.
Here are five of the 16 stocks that passed the screen:
Dine Brands Global, Inc. (DIN - Free Report) is a full-service restaurants operator in the United States and internationally. It has a Momentum Score of A and an average four-quarter positive earnings surprise of 7.3%.
Builders FirstSource, Inc. (BLDR - Free Report) is a manufacturer and supplier of building materials, manufactured components and construction services. It has a Momentum Score of B and an average four-quarter positive earnings surprise of 67.4%.
Centene Corp. (CNC - Free Report) is a diversified and multi-national healthcare enterprise. It has a Momentum Score of A and an average four-quarter positive earnings surprise of 9.8%.
Encore Wire Corporation (WIRE - Free Report) is a manufacturer of electrical building wire and cable products. It has a Momentum Score of B and an average four-quarter positive earnings surprise of 54.5%.
HFF, Inc. (HF - Free Report) is a commercial real estate and capital market services provider. It has a Momentum Score of A and an average four-quarter positive earnings surprise of 22.4%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »
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5 Best Momentum Stocks to Buy Using Driehaus Strategy
Driehaus strategy is considered as one of the finest investment approaches for individuals, who have the propensity to take higher risk. Investors can easily chose momentum stocks using this particular strategy to get high returns. This investment strategy was developed by Richard Herman Driehaus using the buy high and sell higher principle. The success of this strategy ultimately helped Driehaus secure a place in Barron’s All-Century Team.
The American Association of Individual Investors (AAII) proved that the strategy has the potential to offer high returns. AAII’s portfolio, which was developed following the strategy, returned 13.5% and 18.1% in the five and 10-year time frames, respectively, compared with -1.1% and 4.2% returns registered by the S&P 500. Thus, investors with a high risk appetite might give the Driehaus strategy a thought to boost returns.
A Brief Note on Driehaus’ Strategy
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 a decline and try to guess when it will turn around.” In keeping with his insight, AAII took into account the percentage 50-day moving average as one of the key criteria before designing a portfolio.
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. A positive percentage 50-day moving average indicates that the stock is trading at a price higher than its 50-day moving average level, indicating an uptrend.
Moreover, AAII found that Driehaus primarily focused on strong earnings growth rates and impressive earnings projections to pick potential outperformers. Companies with a strong history of beating estimates are also given importance in this strategy, which was made to provide better returns over the long term.
Screening Parameters
Our research shows that stocks with a Zacks Rank #1 or 2 (Buy) and a Momentum Score of A or B offer the best upside potential.
• Zacks Rank equal to #1
(Only Strong Buy-rated stocks can get through. 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 improving business.)
• Trailing 12 month EPS growth higher than 0 and industry median
(Higher EPS growth compared to the industry average indicates superior stocks.)
• Last four-quarter average EPS surprise greater than 5%
(Positive EPS surprise indicates potential.)
• Positive % 50-day moving average and relative strength over 4 weeks
(High % 50-day moving average and relative strength signal uptrend.)
• Momentum Score equal to or less than B
(Ideal for taking advantage of momentum with the highest probability of success.)
These few parameters narrowed down the universe of over 7,904 stocks to only 16.
Here are five of the 16 stocks that passed the screen:
Dine Brands Global, Inc. (DIN - Free Report) is a full-service restaurants operator in the United States and internationally. It has a Momentum Score of A and an average four-quarter positive earnings surprise of 7.3%.
Builders FirstSource, Inc. (BLDR - Free Report) is a manufacturer and supplier of building materials, manufactured components and construction services. It has a Momentum Score of B and an average four-quarter positive earnings surprise of 67.4%.
Centene Corp. (CNC - Free Report) is a diversified and multi-national healthcare enterprise. It has a Momentum Score of A and an average four-quarter positive earnings surprise of 9.8%.
Encore Wire Corporation (WIRE - Free Report) is a manufacturer of electrical building wire and cable products. It has a Momentum Score of B and an average four-quarter positive earnings surprise of 54.5%.
HFF, Inc. (HF - Free Report) is a commercial real estate and capital market services provider. It has a Momentum Score of A and an average four-quarter positive earnings surprise of 22.4%.
Get the rest of the stocks on the list and start putting this and other ideas to the test. It can all be done with the Research Wizard stock picking and backtesting software.
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.
Zacks Restaurant Recommendations: In addition to dining at these special places, you can feast on their stock shares. A Zacks Special Report spotlights 5 recent IPOs to watch plus 2 stocks that offer immediate promise in a booming sector. Download it free »