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Buy 3 Momentum Anomaly Stocks as Markets Rise on Rate Cut Hint
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The broader U.S. equity markets have witnessed a steady uptrend over the past couple of trading sessions, buoyed by strong signals from Federal Reserve Chair Jerome Powell about interest rate cuts happening soon. Despite any definite time frame or the quantum of the proposed rate cuts, markets were quick to respond positively and are currently trading in the vicinity of all-time highs. This followed one of the worst performances at the beginning of the month due to a global market sell-off with the unwinding of the yen “carry trade” as the yen rose in value versus the U.S. dollar.
With a better-than-expected 2.8% annualized GDP growth in the second quarter and solid labor market conditions, it appeared that the economy was back on the growth track, cooling recessionary fears. Amid the uncertainty, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks like H&R Block, Inc. (HRB - Free Report) , Nova Ltd. (NVMI - Free Report) and Jackson Financial Inc. (JXN - Free Report) when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. So, this strategy is quite tricky to implement, as detecting these trends is no child’s play. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
Screening Parameters for Momentum Anomaly Stocks
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform other stocks.
Current Price greater than $5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure the stability of price.
Average 20-Day Volume greater than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three stocks out of the four that made it through this screen:
Headquartered in Kansas City, MO, H&R Block is a leading provider of tax preparation services. The company provides assisted income tax return preparation, do-it-yourself tax solutions and other products and services associated with income tax return preparation in the United States, Canada and Australia. The stock has surged 60.1% in the past year but declined 2.3% in the past week. H&R Block has a Momentum Score of B.
Headquartered in Rehovot, Israel, Nova designs, develops, produces and sells process control systems used in the manufacture of semiconductors in Israel, Taiwan, the United States, China, Korea and internationally. Its product portfolio includes a set of metrology platforms for dimensional, films and materials and chemical metrology measurements for process control for various semiconductor manufacturing process steps, including lithography, chemical mechanical planarization, deposition, electrochemical plating and advanced packaging. The stock has gained 81.1% in the past year but declined 6.6% in the past week. Nova has a Momentum Score of A.
Headquartered in Lansing, MI, Jackson offers a wide range of annuities to retail investors in the United States. The company operates through three segments: Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks. The stock has rallied 147.4% in the past year but lost 3.4% in the past week. Jackson has a Momentum Score of B.
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 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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Buy 3 Momentum Anomaly Stocks as Markets Rise on Rate Cut Hint
The broader U.S. equity markets have witnessed a steady uptrend over the past couple of trading sessions, buoyed by strong signals from Federal Reserve Chair Jerome Powell about interest rate cuts happening soon. Despite any definite time frame or the quantum of the proposed rate cuts, markets were quick to respond positively and are currently trading in the vicinity of all-time highs. This followed one of the worst performances at the beginning of the month due to a global market sell-off with the unwinding of the yen “carry trade” as the yen rose in value versus the U.S. dollar.
With a better-than-expected 2.8% annualized GDP growth in the second quarter and solid labor market conditions, it appeared that the economy was back on the growth track, cooling recessionary fears. Amid the uncertainty, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks like H&R Block, Inc. (HRB - Free Report) , Nova Ltd. (NVMI - Free Report) and Jackson Financial Inc. (JXN - Free Report) when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. Momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. So, this strategy is quite tricky to implement, as detecting these trends is no child’s play. Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
Screening Parameters for Momentum Anomaly Stocks
Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.
Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.
Zacks Rank #1: Stocks sporting a Zacks Rank #1 (Strong Buy) have a proven history of outperformance irrespective of the market conditions. You can see the complete list of today’s Zacks #1 Rank stocks here.
Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform other stocks.
Current Price greater than $5: The stocks must all be trading at a minimum of $5.
Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure the stability of price.
Average 20-Day Volume greater than 100,000: A substantial trading volume ensures that these stocks are easily tradable.
Here are three stocks out of the four that made it through this screen:
Headquartered in Kansas City, MO, H&R Block is a leading provider of tax preparation services. The company provides assisted income tax return preparation, do-it-yourself tax solutions and other products and services associated with income tax return preparation in the United States, Canada and Australia. The stock has surged 60.1% in the past year but declined 2.3% in the past week. H&R Block has a Momentum Score of B.
Headquartered in Rehovot, Israel, Nova designs, develops, produces and sells process control systems used in the manufacture of semiconductors in Israel, Taiwan, the United States, China, Korea and internationally. Its product portfolio includes a set of metrology platforms for dimensional, films and materials and chemical metrology measurements for process control for various semiconductor manufacturing process steps, including lithography, chemical mechanical planarization, deposition, electrochemical plating and advanced packaging. The stock has gained 81.1% in the past year but declined 6.6% in the past week. Nova has a Momentum Score of A.
Headquartered in Lansing, MI, Jackson offers a wide range of annuities to retail investors in the United States. The company operates through three segments: Retail Annuities, Institutional Products, and Closed Life and Annuity Blocks. The stock has rallied 147.4% in the past year but lost 3.4% in the past week. Jackson has a Momentum Score of B.
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 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.