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4 Top Momentum Stocks Powered by Driehaus Strategy
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Richard Herman Driehaus, a well-known American businessman and fund manager, developed an investment approach based on the buy high and sell higher rule. This investment strategy is perfect for investors with an inclination toward enormous risk-taking. Using this strategy, investors gain from momentum stocks. Following the success of this investment plan, Driehaus was able to attain a place in Barron’s All-Century Team.
Portfolios such as the American Association of Individual Investors (AAII) have proven time and again that the strategy has the potential to offer high returns. Thus, investors with a high-risk appetite may opt for this strategy.
To that end, Tilly's, Inc. (TLYS - Free Report) , HomeTrust Bancshares, Inc. (HTBI - Free Report) , Fidelity National Financial, Inc. (FNF - Free Report) , and Berry Global Group, Inc. (BERY - Free Report) have been selected as the momentum picks for the day, using the Driehaus strategy.
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 considered 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 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
The percentage 50-day moving average is one of the key criteria in this strategy. 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. 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.
In order to make the strategy more profitable, we have considered only those stocks that have 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 or 2 (Buy) offer the best upside potential.
Strong EPS growth history ensures 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 50-day moving average and relative strength signal uptrend
• Momentum Score equal to or less than B
A favorable momentum score indicates that it is ideal to take advantage of the momentum with the highest probability of success.
These few parameters have narrowed down the universe of over 7,622 stocks to only 25.
Here are four of the 25 stocks:
Tilly's, Inc. is a specialty retailer in the action sports industry and sells clothing, shoes and accessories. TLYS distributes t-shirts, sweatshirts, jackets, shorts, pants, jeans, sweaters, swimwear, shoes and accessories for men, women and kids through its website.
Tilly's has a Momentum Score of A. The trailing four-quarter earnings surprise is more than 100%, on average.
HomeTrust Bancshares, Inc. is a bank holding company. HTBI operates through HomeTrust Bank, a federally chartered mutual savings bank. HomeTrust Bancshares’ is engaged in attracting deposits from the general public and investing those funds, along with borrowed funds, in loans secured primarily by first and second mortgages on one- to four-family residences.
HomeTrust Bancshares has a Momentum Score of B and a four-quarter earnings surprise of 45.4%, on average.
Fidelity National Financial, Inc. is a provider of title insurance, specialty insurance and claims management services. FNF is one of the nation's largest title insurance companies through its title insurance underwriters.
Fidelity National Financial has a Momentum Score of B. The trailing four-quarter earnings surprise is 38.2%, on average.
Berry Global Group, Inc. manufactures and markets value-added plastic consumer packaging and engineered materials. Berry Global Group’s products include engineered materials, non-woven specialty materials and consumer packaging.
BERY has a Momentum Score of B and a trailing four-quarter earnings surprise of 16.5%, on average.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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.
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4 Top Momentum Stocks Powered by Driehaus Strategy
Richard Herman Driehaus, a well-known American businessman and fund manager, developed an investment approach based on the buy high and sell higher rule. This investment strategy is perfect for investors with an inclination toward enormous risk-taking. Using this strategy, investors gain from momentum stocks. Following the success of this investment plan, Driehaus was able to attain a place in Barron’s All-Century Team.
Portfolios such as the American Association of Individual Investors (AAII) have proven time and again that the strategy has the potential to offer high returns. Thus, investors with a high-risk appetite may opt for this strategy.
To that end, Tilly's, Inc. (TLYS - Free Report) , HomeTrust Bancshares, Inc. (HTBI - Free Report) , Fidelity National Financial, Inc. (FNF - Free Report) , and Berry Global Group, Inc. (BERY - Free Report) have been selected as the momentum picks for the day, using the Driehaus strategy.
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 considered 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 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
The percentage 50-day moving average is one of the key criteria in this strategy. 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. 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.
In order to make the strategy more profitable, we have considered only those stocks that have 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 or 2 (Buy) 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 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 50-day moving average and relative strength signal uptrend
• Momentum Score equal to or less than B
A favorable momentum score indicates that it is ideal to take advantage of the momentum with the highest probability of success.
These few parameters have narrowed down the universe of over 7,622 stocks to only 25.
Here are four of the 25 stocks:
Tilly's, Inc. is a specialty retailer in the action sports industry and sells clothing, shoes and accessories. TLYS distributes t-shirts, sweatshirts, jackets, shorts, pants, jeans, sweaters, swimwear, shoes and accessories for men, women and kids through its website.
Tilly's has a Momentum Score of A. The trailing four-quarter earnings surprise is more than 100%, on average.
HomeTrust Bancshares, Inc. is a bank holding company. HTBI operates through HomeTrust Bank, a federally chartered mutual savings bank. HomeTrust Bancshares’ is engaged in attracting deposits from the general public and investing those funds, along with borrowed funds, in loans secured primarily by first and second mortgages on one- to four-family residences.
HomeTrust Bancshares has a Momentum Score of B and a four-quarter earnings surprise of 45.4%, on average.
Fidelity National Financial, Inc. is a provider of title insurance, specialty insurance and claims management services. FNF is one of the nation's largest title insurance companies through its title insurance underwriters.
Fidelity National Financial has a Momentum Score of B. The trailing four-quarter earnings surprise is 38.2%, on average.
Berry Global Group, Inc. manufactures and markets value-added plastic consumer packaging and engineered materials. Berry Global Group’s products include engineered materials, non-woven specialty materials and consumer packaging.
BERY has a Momentum Score of B and a trailing four-quarter earnings surprise of 16.5%, on average.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
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.