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After a solid comeback, the U.S. stocks are again exhibiting signs of volatility on renewed threats of global slowdown following weak economic data globally. This is especially true as the European Central Bank (ECB) cut its economic growth forecast for this year and pledged to hold off on any interest rate increases until at least the end of the year, implying a slowdown in the economy (read: ECB Surprisingly Dovish: Play Currency-Hedged Euro Zone ETFs).
The United States added just 20,000 new jobs in February, the smallest gain since September 2017, hinting at signs of slowdown in the U.S. economy. Additionally, soft data out of Japan, Australia and China as well as ongoing Brexit drama led to a risk-off trade. Further, a warning from the top American trade negotiator that tariffs on Chinese goods may not be rolled back will weigh on the stock market.
However, long-term fundamentals remain intact given improving economy, rising wages, higher consumer confidence and rebound in oil prices. Amid such backdrop, 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 and Worst ETFs of Last Week).
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.
This fund provides exposure to large and mid-cap stocks that exhibit relatively 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 $8.5 billion.
This fund tracks the Dorsey Wright Technical Leaders Index, which measures the performance of companies that demonstrate powerful relative strength characteristics. It has amassed $1.4 billion in its asset base and charges 63 bps in annual fees (read: Growth Worries Resurface as Bulls Turn 10: 5 ETF Buying Zones).
With AUM of $453.7 million, this product targets the large cap securities with a combination of core factors (high value, high quality, and low size characteristics) and 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).
USAA MSCI USA Value Momentum Blend Index ETF (ULVM - Free Report)
This fund tracks the MSCI USA Select Value Momentum Blend Index, which offers exposure to large and mid-cap companies that have higher exposure to value and momentum factors while also maintaining moderate turnover and lower realized volatility than traditional capitalization weighted indexes. It has accumulated $412.2 million in AUM and charges 0.20% in expense ratio.
This ETF offers exposure to the small-cap segment of the broad U.S. stock market. It follows the Dorsey Wright SmallCap Technical Leaders Index that is designed to identify small-cap firms with positive relative strength characteristics. DWAS has AUM of $250.2 million and expense ratio of 0.60% (read: 5 Small-Cap ETFs & Stocks Beating Russell 2000).
This Bermuda-based shipping company is engaged in the seaborne transportation of crude oil and oil products worldwide. It has witnessed solid earnings estimate revision of 5 cents for this year over the past 30 days. The stock has a Zacks Rank #2 (Buy) and Momentum Score of A.
This Chicago-based real estate services firm acquires and develops commercial properties as well as provides property leasing, facilities management, tenant representation and valuation services. It witnessed positive earnings estimate revision of 5 cents over the past 30 days for this year. The stock has a Zacks Rank #2 and Momentum Score of A.
This South Korea-based company generates and supplies electric power to its customers, both industrial and residential. The Zacks Consensus Estimate has moved up from a loss of $1.19 to a loss of 89 cents over the past 30 days. The stock has a Zacks Rank #1 (Strong Buy) and Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lincoln Educational Services Corporation (LINC - Free Report)
This New Jersey-based company is a leading and diversified for-profit provider of a career-oriented post-secondary education. It has seen positive earnings estimate revision of 5 cents for this year in a month. The stock has a Zacks Rank #2 and Momentum Score of A.
Third Point Reinsurance Ltd.
This Bermuda-based company is a property and casualty reinsurance company. It witnessed solid earnings estimate revision of 19 cents for this year in a month. The stock has a Zacks Rank #1 and Momentum Score of A.
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Bet on Momentum ETFs & Stocks Now
After a solid comeback, the U.S. stocks are again exhibiting signs of volatility on renewed threats of global slowdown following weak economic data globally. This is especially true as the European Central Bank (ECB) cut its economic growth forecast for this year and pledged to hold off on any interest rate increases until at least the end of the year, implying a slowdown in the economy (read: ECB Surprisingly Dovish: Play Currency-Hedged Euro Zone ETFs).
The United States added just 20,000 new jobs in February, the smallest gain since September 2017, hinting at signs of slowdown in the U.S. economy. Additionally, soft data out of Japan, Australia and China as well as ongoing Brexit drama led to a risk-off trade. Further, a warning from the top American trade negotiator that tariffs on Chinese goods may not be rolled back will weigh on the stock market.
However, long-term fundamentals remain intact given improving economy, rising wages, higher consumer confidence and rebound in oil prices. Amid such backdrop, 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 and Worst ETFs of Last Week).
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 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 $8.5 billion.
Invesco DWA Momentum ETF (PDP - Free Report)
This fund tracks the Dorsey Wright Technical Leaders Index, which measures the performance of companies that demonstrate powerful relative strength characteristics. It has amassed $1.4 billion in its asset base and charges 63 bps in annual fees (read: Growth Worries Resurface as Bulls Turn 10: 5 ETF Buying Zones).
SPDR Russell 1000 Momentum Focus ETF (ONEO - Free Report)
With AUM of $453.7 million, this product targets the large cap securities with a combination of core factors (high value, high quality, and low size characteristics) and 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).
USAA MSCI USA Value Momentum Blend Index ETF (ULVM - Free Report)
This fund tracks the MSCI USA Select Value Momentum Blend Index, which offers exposure to large and mid-cap companies that have higher exposure to value and momentum factors while also maintaining moderate turnover and lower realized volatility than traditional capitalization weighted indexes. It has accumulated $412.2 million in AUM and charges 0.20% in expense ratio.
Invesco DWA SmallCap Momentum ETF (DWAS - Free Report)
This ETF offers exposure to the small-cap segment of the broad U.S. stock market. It follows the Dorsey Wright SmallCap Technical Leaders Index that is designed to identify small-cap firms with positive relative strength characteristics. DWAS has AUM of $250.2 million and expense ratio of 0.60% (read: 5 Small-Cap ETFs & Stocks Beating Russell 2000).
Stock Picks
Frontline Ltd. (FRO - Free Report)
This Bermuda-based shipping company is engaged in the seaborne transportation of crude oil and oil products worldwide. It has witnessed solid earnings estimate revision of 5 cents for this year over the past 30 days. The stock has a Zacks Rank #2 (Buy) and Momentum Score of A.
Cushman & Wakefield PLC (CWK - Free Report)
This Chicago-based real estate services firm acquires and develops commercial properties as well as provides property leasing, facilities management, tenant representation and valuation services. It witnessed positive earnings estimate revision of 5 cents over the past 30 days for this year. The stock has a Zacks Rank #2 and Momentum Score of A.
Korea Electric Power Corporation (KEP - Free Report)
This South Korea-based company generates and supplies electric power to its customers, both industrial and residential. The Zacks Consensus Estimate has moved up from a loss of $1.19 to a loss of 89 cents over the past 30 days. The stock has a Zacks Rank #1 (Strong Buy) and Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lincoln Educational Services Corporation (LINC - Free Report)
This New Jersey-based company is a leading and diversified for-profit provider of a career-oriented post-secondary education. It has seen positive earnings estimate revision of 5 cents for this year in a month. The stock has a Zacks Rank #2 and Momentum Score of A.
Third Point Reinsurance Ltd.
This Bermuda-based company is a property and casualty reinsurance company. It witnessed solid earnings estimate revision of 19 cents for this year in a month. The stock has a Zacks Rank #1 and Momentum Score of A.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>