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Bet on Higher Market With Momentum ETFs & Stocks

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After a brutal week, Wall Street resumed its rally by regaining momentum in the technology sector, solid earnings expectations and easing fears over trade tension. In fact, China’s President Xi Jinping at a major conference in Asia calmed an escalating trade dispute with the United States by promising to open the country’s economy further and lower import tariffs on products including cars.

Earnings for the S&P 500 index are expected to grow 16% from the same period last year on 7.4% higher revenues. Earnings growth is much higher than the Q4 growth of 13.5% and represents the highest quarterly earnings growth in seven years. Additionally, improving global growth and tax reform are acting as a key catalyst for the stock market (read: Bet on These Sector ETFs & Stocks for Q1 Earnings).

Notably, $1.5 trillion tax cuts will save billions in the corporate world, boosting earnings and reflation trade. It would further spark a wave of share buybacks, dividend hikes and mergers & acquisitions. All these suggest that a nine-year bull market still has legs and will strengthen the second-largest bull run in the history. Further, growth in the U.S. economy has been solid, courtesy of an impressive labor market, higher wages, increasing consumer spending and record consumer confidence.

Amid bullish sentiments and defused trade war fears, which have led to wild swings, momentum investing would be a winning strategy for those seeking higher returns in a short spell. This is because the strategy looks to fetch profits from buying hot stocks that have shown an uptrend over the past few weeks or months (read: Best Performing ETFs of 9-Year Bull Run).

As such, we have presented five ETFs and stocks that could lead to outperformance in the current market environment. Further, these could even beat broader market returns in the coming months if these trends prevail.

ETF Picks

iShares Edge MSCI USA Momentum Factor ETF (MTUM - Free Report) )

This fund provides exposure to large and mid-cap stocks that exhibit relatively a higher price momentum by tracking the MSCI USA Momentum Index. It charges 15 bps in fees per year and is the popular choice with AUM of $7.8 billion.

Goldman Sachs ActiveBeta U.S. Large Cap Equity ETF (GSLC - Free Report)

This fund seeks to offer exposure to 440 stocks with four well-established attributes of performance: good value, strong momentum, high quality and low volatility. It tracks the Goldman Sachs ActiveBeta U.S. Large Cap Equity Index, charging investors 9 bps in annual fees. The fund has amassed $3 billion in its asset base and has a Zacks ETF Rank #2 (Buy).

First Trust Dorsey Wright Focus 5 ETF (FV - Free Report)

This product tracks the Dorsey Wright Focus Five Index, which provides targeted exposure to five First Trust sector and industry based ETFs that Dorsey, Wright & Associates (DWA) believes have the greatest potential to outperform the other ETFs in the universe. The approach results in a slightly higher fee of 89 bps per year and has AUM of $2.5 billion (read: 5 Ultra-Cheap Growth ETFs for a Large-Cap Play This Spring).

SPDR Russell 1000 Momentum Focus ETF (ONEO - Free Report)

With AUM of $559.6 million, this product targets the large cap securities with a combination of core factors (high value, high quality, and low size characteristics), with a focus factor comprising high momentum characteristics. It follows the Russell 1000 Momentum Focused Factor Index and charges an annual fee of 20 bps. The fund has a Zacks ETF Rank #3 (Hold).

MomentumShares U.S. Quantitative Momentum ETF (QMOM - Free Report)

This is an actively managed ETF consisting of stocks having the highest quality momentum. It is often overlooked by investors as depicted by its AUM of $59.9 million and charges 79 bps annually from investors.

Stock Picks

Micron Technology Inc (MU - Free Report)


This Idaho-based company is one of the leading worldwide providers of semiconductor memory solutions. It has seen solid earnings estimate revision of 42 cents for the fiscal year (ending August 2018) over the past 30 days with an expected earnings growth of 121.57%. The stock has a Zacks Rank #1 (Strong Buy) and Momentum Style Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Boeing Company (BA - Free Report)

This Illinois-based world's largest aerospace company is the leading manufacturer of commercial jetliners and defense, space and security systems. It saw positive earnings estimate revision of six cents over the past 60 days for this year, with an expected earnings growth of 16.69%. The stock has a Zacks Rank #2 and Momentum Style Score of A.

Archer-Daniels-Midland Company (ADM - Free Report)

This Illinois-based company procures, transports, stores, processes, and merchandises agricultural commodities and products. It saw solid earnings estimates revision of three cents for this year over the past 30 days, with an expected earnings growth of 18.52%. The stock has a Zacks Rank #1 and Momentum Style Score of A (read: US-China Trade Dispute: The Ultimate Stock Showdown!).

Continental Resources Inc.

This is a crude-oil concentrated, independent oil and natural gas exploration and production company with operations in the Rocky Mountain, Mid-Continent and Gulf Coast regions of the United States. It has seen positive earnings estimate revision of five cents for this year over the past 30 days and has an estimated earnings growth of 370.59%. The stock has a Zacks Rank #1 and Momentum Style Score of A.

Steel Dynamics Inc. (STLD - Free Report)

This Indiana-based company is engaged in the steel products manufacturing and metals recycling businesses in the United States and internationally. It saw solid earnings estimate revision of 34 cents for this year in a month, with massive expected earnings growth of 62.64%. The stock has a Zacks Rank #1 and Momentum Style Score of A.

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