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3 Momentum Anomaly Stocks to Buy as Markets Skid on Growth Concerns
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The broader U.S. equity markets witnessed a downtrend for the past four consecutive trading days as concerns regarding a slowing economy and sticky inflation took center stage. With the Purchasing managers’ index tally for January portraying a contraction in the U.S. services sector and the University of Michigan’s consumer sentiment index coming in weaker than expected, investors mostly moved to safe-haven assets. Apprehensions regarding escalating tariffs with President Trump vouching to enforce retaliatory trade barriers added to the cacophony. These led to a spike in 10-year Treasury yields, hitting the equity markets hard.
However, Federal Reserve Chair Jerome Powell has indicated that there would be no hasty moves by the Fed to ease the monetary policy, as the focus has now shifted to the January reading of the personal consumption expenditures price index due on Friday. 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 Sprouts Farmers Market, Inc. (SFM - Free Report) , Robinhood Markets, Inc. (HOOD - Free Report) and Carvana Co. (CVNA - 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 five that made it through this screen:
Phoenix, AZ-based Sprouts Farmers is an everyday healthy grocery store. The company has been diversifying its offerings to meet the changing preferences of consumers, who are looking for more health and wellness products. These products are generally plant-based, gluten-free, keto-friendly and grass-fed. The company has been focusing on natural and organic food, which is one of the fastest-growing segments in the industry. The stock has surged 137.6% in the past year but declined 15.6% in the past week. Sprouts Farmers has a Momentum Score of A.
Headquartered in Menlo Park, CA, Robinhood Markets is a financial services company that offers trading services in crypto, stocks, options and ETFs, cash management, margin and securities lending, and Robinhood Gold. The company aims to democratize finance through its commission-free trading model, which was launched in 2013 with no account minimums. The stock has rallied 182.6% in the past year but declined 24% in the past week. Robinhood Markets has a Momentum Score of A.
Headquartered in Phoenix, AZ, Carvana is a leading e-commerce platform for buying and selling used cars. Carvana’s end-to-end online business model that covers every aspect of used-car retailing — including sales, financing, logistics, inspection and repair centers, and software development — has transformed traditional used-car sales in several ways. The stock has surged 175.7% in the past year but declined 22.1% in the past week. Carvana has a Momentum Score of A.
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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3 Momentum Anomaly Stocks to Buy as Markets Skid on Growth Concerns
The broader U.S. equity markets witnessed a downtrend for the past four consecutive trading days as concerns regarding a slowing economy and sticky inflation took center stage. With the Purchasing managers’ index tally for January portraying a contraction in the U.S. services sector and the University of Michigan’s consumer sentiment index coming in weaker than expected, investors mostly moved to safe-haven assets. Apprehensions regarding escalating tariffs with President Trump vouching to enforce retaliatory trade barriers added to the cacophony. These led to a spike in 10-year Treasury yields, hitting the equity markets hard.
However, Federal Reserve Chair Jerome Powell has indicated that there would be no hasty moves by the Fed to ease the monetary policy, as the focus has now shifted to the January reading of the personal consumption expenditures price index due on Friday. 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 Sprouts Farmers Market, Inc. (SFM - Free Report) , Robinhood Markets, Inc. (HOOD - Free Report) and Carvana Co. (CVNA - 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 five that made it through this screen:
Phoenix, AZ-based Sprouts Farmers is an everyday healthy grocery store. The company has been diversifying its offerings to meet the changing preferences of consumers, who are looking for more health and wellness products. These products are generally plant-based, gluten-free, keto-friendly and grass-fed. The company has been focusing on natural and organic food, which is one of the fastest-growing segments in the industry. The stock has surged 137.6% in the past year but declined 15.6% in the past week. Sprouts Farmers has a Momentum Score of A.
Headquartered in Menlo Park, CA, Robinhood Markets is a financial services company that offers trading services in crypto, stocks, options and ETFs, cash management, margin and securities lending, and Robinhood Gold. The company aims to democratize finance through its commission-free trading model, which was launched in 2013 with no account minimums. The stock has rallied 182.6% in the past year but declined 24% in the past week. Robinhood Markets has a Momentum Score of A.
Headquartered in Phoenix, AZ, Carvana is a leading e-commerce platform for buying and selling used cars. Carvana’s end-to-end online business model that covers every aspect of used-car retailing — including sales, financing, logistics, inspection and repair centers, and software development — has transformed traditional used-car sales in several ways. The stock has surged 175.7% in the past year but declined 22.1% in the past week. Carvana has a Momentum Score of A.
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.