Back to top

Here's Why Momentum Investors Will Love Hershey (HSY)

Read MoreHide Full Article

Momentum investing is all about the idea of following a stock's recent trend, which can be in either direction. In the 'long' context, investors will essentially be "buying high, but hoping to sell even higher." And for investors following this methodology, taking advantage of trends in a stock's price is key; once a stock establishes a course, it is more than likely to continue moving in that direction. The goal is that once a stock heads down a fixed path, it will lead to timely and profitable trades.

Even though momentum is a popular stock characteristic, it can be tough to define. Debate surrounding which are the best and worst metrics to focus on is lengthy, but the Zacks Momentum Style Score, part of the Zacks Style Scores, helps address this issue for us.

Below, we take a look at Hershey (HSY - Free Report) , which currently has a Momentum Style Score of A. We also discuss some of the main drivers of the Momentum Style Score, like price change and earnings estimate revisions.

It's also important to note that Style Scores work as a complement to the Zacks Rank, our stock rating system that has an impressive track record of outperformance. Hershey currently has a Zacks Rank of #2 (Buy). Our research shows that stocks rated Zacks Rank #1 (Strong Buy) and #2 (Buy) and Style Scores of A or B outperform the market over the following one-month period.

You can see the current list of Zacks #1 Rank Stocks here >>>

Set to Beat the Market?

Let's discuss some of the components of the Momentum Style Score for HSY that show why this chocolate bar and candy maker shows promise as a solid momentum pick.

Looking at a stock's short-term price activity is a great way to gauge if it has momentum, since this can reflect both the current interest in a stock and if buyers or sellers have the upper hand at the moment. It's also helpful to compare a security to its industry; this can show investors the best companies in a particular area.

For HSY, shares are up 4.58% over the past week while the Zacks Food - Confectionery industry is up 2.69% over the same time period. Shares are looking quite well from a longer time frame too, as the monthly price change of 7.68% compares favorably with the industry's 0.98% performance as well.

Considering longer term price metrics, like performance over the last three months or year, can be advantageous as well. Shares of Hershey have increased 25.14% over the past quarter, and have gained 46.52% in the last year. In comparison, the S&P 500 has only moved 4.24% and 5.78%, respectively.

Investors should also take note of HSY's average 20-day trading volume. Volume is a useful item in many ways, and the 20-day average establishes a good price-to-volume baseline; a rising stock with above average volume is generally a bullish sign, whereas a declining stock on above average volume is typically bearish. Right now, HSY is averaging 1,395,748 shares for the last 20 days.

Earnings Outlook

The Zacks Momentum Style Score encompasses many things, including estimate revisions and a stock's price movement. Investors should note that earnings estimates are also significant to the Zacks Rank, and a nice path here can be promising. We have recently been noticing this with HSY.

Over the past two months, 5 earnings estimates moved higher compared to none lower for the full year. These revisions helped boost HSY's consensus estimate, increasing from $5.64 to $5.70 in the past 60 days. Looking at the next fiscal year, 3 estimates have moved upwards while there have been 1 downward revision in the same time period.

Bottom Line

Taking into account all of these elements, it should come as no surprise that HSY is a #2 (Buy) stock with a Momentum Score of A. If you've been searching for a fresh pick that's set to rise in the near-term, make sure to keep Hershey on your short list.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Hershey Company (The) (HSY) - free report >>

Published in