Ride the Momentum with These 5 Stocks

Laveta Brigham

I know I tend to go on about the long term, and how we must be really careful about buying into a trend that could end real fast, especially since the market’s at unprecedented highs and sentiments are going through the roof. But that’s basically one side of the story. […]

I know I tend to go on about the long term, and how we must be really careful about buying into a trend that could end real fast, especially since the market’s at unprecedented highs and sentiments are going through the roof.

But that’s basically one side of the story. It doesn’t mean that we must put all our money into stocks that we must hang on to forever. Not at all. The idea of long term buys, dividend stocks, etc is that we provide ourselves some sort of a buffer so we can absorb the volatility in riskier bets.

There are a couple of reasons why I think that we can and should make the most of the volatility in the market.

First among them are the improving macro numbers. So we see that the ISM numbers released earlier this month indicate expansion in the manufacturing sector; the HUD statistics point to improving trends in the housing market; data from the National Retail Federation (NRF) and the U.S. Census Bureau indicate improvement from the April lows; and finally, data from the Bureau of Labor Statistics indicates that the employment situation is showing some improvement.

The one figure that seems disappointing is the consumer confidence index, which declined significantly from July to 84.2. This number is based on consumer expectations about the short-term outlook for income, business, and labor market conditions. But it’s important to remember that this preceded the Abbot announcement.

Abbot’s test kit, worth only $5 throws up a result in 15 minutes. What’s more, you don’t need a labor expensive equipment to get it done. It’s a simple swab test that anyone trained for the purpose could pull off. Abbott is planning 50 million tests a month by October. This means that all the places where we were afraid to frequent including restaurants, parks, etc, could be back in business. And that’s huge for employment, huge for sentiments and should be huge for the markets as well.

Vaccines only improve the situation further.

So yes, it’s riskier to trade the momentum when underlying market conditions aren’t so good. But when they are improving noticeably, and there are events lined up in the not-too-distant future that should further push that trend, we should make most of the opportunity.

So here, I’ve lined up some Zacks buy-ranked stocks that also have a Momentum Score A. And as a refresher, let me tell you, the Momentum Score indicates when it’s the right time to enter a trade to maximize your profits. So here goes-

Box, Inc. BOX

The company is a provider of a cloud content management platform for advertising, construction, consumer packaged goods, education, energy, financial services and insurance, government, healthcare and life sciences, high tech, legal, manufacturing, media and entertainment, and retail customers. The platform enables internal and external collaboration on content, automation of content-driven business processes, development of custom applications, data protection, security and compliance features.

Zacks Rank #2 (Buy)

Industry: Internet – Software (top 50% of 250+ Zacks-ranked industries)

Growth Score A

Momentum Score A

Topped June quarter estimates by 38.5%

Both revenue and earnings for 2021 (ending January) and 2022 are expected to grow

DICKS Sporting Goods, Inc. DKS

DICK’S Sporting Goods operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf, water sports, etc.

Zacks Rank #1 (Strong Buy)

Industry: Retail – Miscellaneous (top 38%)

Value Score A

Growth Score A

Momentum Score A

Topped June quarter estimates by 158.9%

Earnings are expected to grow both this fiscal year (ending January) and the next. Revenue is expected to decline slightly this year and pick up in 2022.

Rush Enterprises, Inc. RUSHA

Rush Enterprises operates the largest network of Peterbilt heavy-duty truck dealerships in North America and John Deere construction equipment dealerships in Texas and Michigan. Its current operations include a network of dealerships across Texas, California, Oklahoma, Louisiana, Colorado, Arizona, New Mexico and Michigan. These dealerships provide an integrated, one-stop source for the retail sale of new and used heavy-duty trucks and construction equipment; aftermarket parts, service and body shop facilities; and a wide array of financial services.

Zacks Rank #1 (Strong Buy)

Industry: Automotive – Retail and Whole Sales (top 1%)

Value Score A

Growth Score B

Momentum Score A

Topped June quarter estimates by 1433.3%

Earnings are expected to decline this fiscal year but grow double-digits in 2021. Revenue estimates aren’t available.

MarineMax, Inc. HZO

MarineMax, Inc. is the nation’s largest recreational boat and yacht retailer selling both new and used recreational boats and related marine products and services. It also offers yacht brokerage and charter services.  It sells many premium bands including Sea Ray, Boston Whaler, Meridian, Hatteras, Azimut Yachts, Ocean Alexander, Galeon, Grady-White, Harris, Crest, Scout, Sailfish, Sea Pro, Scarab Jet Boats, Aquila, and Nautique.

Zacks Rank #1 (Strong Buy)

Industry: Retail – Miscellaneous (top 38%)

Value Score A

Growth Score A

Momentum Score A

Topped June quarter estimates by 116.4%

Revenue and earnings are expected to grow strong double-digits this fiscal year (ending September) and decline a bit in the next.

Kforce, Inc. KFRC

kforce.com is a full-service, web-based specialty staffing firm providing flexible and permanent staffing solutions for organizations and career management for individuals in the specialty skill areas of information technology, finance & accounting, human resources, engineering, pharmaceutical, health care, legal, e-solutions consulting, scientific, insurance and investments. Its web-based services include online resumes, job postings, interactive interviews, job placements and career management strategies.

Zacks Rank #1 (Strong Buy)

Industry: Staffing Firms (top 38%)

Value Score A

Growth Score B

Momentum Score A

Topped June quarter estimates by 74.1%

Earnings are expected to decline slightly this year on revenue that will grow slightly. However, in 2021, earnings will grow on revenue that will decline slightly.

Final Thoughts

It is with respect to momentum trades that the question of timing the market for entry or exit becomes important. While the actual mechanics of momentum stocks depend on long-range moving averages, you can make things simpler for yourself by keeping an eye on the Zacks Momentum Score. If that deteriorates significantly, getting out of the momentum trade may be a good idea (unless there are other reasons to keep holding the shares).

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
DICKS Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
 
MarineMax, Inc. (HZO) : Free Stock Analysis Report
 
Rush Enterprises, Inc. (RUSHA) : Free Stock Analysis Report
 
Kforce, Inc. (KFRC) : Free Stock Analysis Report
 
Box, Inc. (BOX) : Free Stock Analysis Report
 
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