In this 79-month old Bull market, the easy money has already been made. There is nothing quite cheap, unless it’s justifiably so.
Today, it’s all about the next earnings beat story or the latest merger deal or even a brand-new CEO. Welcome to the new Wall Street world of fast markets, fast money and jam-packed trades — where a single piece of news can shoot a stock’s price sky high or squash months of gains in a single day.
In such precarious times, value, growth or income investing might just fall short of making sustained profits for your portfolio.
The Road to Riches
There is another, time-tested winning strategy: simply bet on the frontrunner stocks that are galloping fast. One of the most successful strategies today is to get in on momentum stocks at the right time.
In this market, in a sense, everyone is a momentum trader, scouring for the next hot sector or stock where they can turn a fast profit. This is because momentum stocks have proven to be high fliers in every market setting. But amid all the ups and downs, how will investors distinguish between companies that are just taking a breather before their next leg up from those running on a dead track?
More importantly, how shall we separate the ones just running a sprint from those set for a marathon?
Eye for the Obvious
When we scour for pacesetter stocks that are galloping ahead on strong momentum, we also need to make sure that we don’t bet on those which seem off-the-bridle. For instance, small-cap stocks, with their comparatively deeper risk profile, tend to react much more aggressively to events. Thus, pullbacks or turnarounds also happen faster for these companies, and investors may not get out fast enough to avoid getting trapped.
Hence, we will focus on large-caps, which are big, established companies in the stock market, and have been around for a while. By virtue of their dominant market position, global footprint and relatively consistent cash flow stream, these companies tend to be more reliable investments.
And when these thoroughbreds, most of which are common household names, gain momentum on an upswing, it’s safe to assume that there is some strong rationale for the move.
The Zacks Style Score Seasoning
Notwithstanding the captivating, time-proven strategy and robust fundamentals, the question remains: When to get in?
Here we usher in our new style score system. The Zacks Momentum Style Score indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Back-tested results show that stocks with Style Scores of 'A' or 'B,' when combined with a Zacks Rank #1 (Strong Buy) or #2 (Buy) handily outperform other stocks.
A top Momentum Style Score knocks out a lot of the screening process as it takes into account several factors including volume change and performance relative to its peers.
Flaunting a Zacks Rank #1 or #2 and a Momentum Style Score of ‘A,’ the following stocks are marching ahead, full steam, and still appear to have plenty of upside left. Further, these companies, with a market capitalization north of $10 billion, have been seeing positive analyst interest of late.
5 Surging Big Name Stocks
Electronic Arts Inc. (EA)
Headquartered in Redwood City, CA, Electronic Arts produces top-selling games and related content and services under the EA brand in various categories, including action-adventure, role playing, racing and first-person shooter games. This company is a leading video game developer that should benefit from not only the continuing rise in new console sales, but the rising trend of mobile gaming.
With a market cap of $22.5 billion, EA currently holds a Zacks Rank #1. Over the past month, analysts have become increasingly bullish on the company. The company has seen a sharp spike in the Zacks Consensus Estimate for 2015, which now stands at $2.67, up from $2.50 a month back.
Amazon.com, Inc. (AMZN)
Amazon operates as an online retailer in North America and internationally, through the North America, International and Amazon Web Services segments. The company serves consumers through retail websites, such as amazon.com, amazon.ca and amazon.com.mx, which primarily include merchandise and content purchased for resale from vendors and those offered by third-party sellers.
The Seattle-based online retailer recently reported impressive quarterly results, which catapulted shares above its July highs. The company has a market cap of $294.6 billion and currently holds a Zacks Rank #2.
Not only does the stock have impressive short-term momentum, it has been witnessing solid activity on the earnings estimate revision front as well. Analysts clearly see good things in the company’s future, as the Zacks Consensus Estimate for 2015 earnings has trended sharply up over the past month, from $1.52 to $1.79 per share, thanks to 8 upward estimate revisions versus just 4 lower.
KLA-Tencor Corporation (KLAC)
KLA-Tencor designs, manufactures and markets process control and yield management solutions globally. The company recently announced a $10 billion buyout by semiconductor equipment maker Lam Research Corp. LRCX. The merger of these two companies will likely form an equipment powerhouse with an extensive range of products, customer base and scale.
With a market cap of $10.4 billion, the company currently sports a Zacks Rank #2.
Analysts have great expectations from the company this year and have been revising 2015 earnings estimates upward over the past month. KLA-Tencor has seen 7 positive revisions over the past 4 weeks, resulting in its fiscal 2016 estimate climbing from $3.34 to $3.56.
Tesoro Corporation (TSO)
Tesoro Corporation is one of the largest independent refiners and marketers of petroleum products in the U.S. Its retail-marketing system includes over 2,265 retail stations under the ARCO®, Shell®, Exxon®, Mobil®, USA Gasoline (TM) and Tesoro® brands.
Tesoro shares have continued to benefit from the “crack spread” on crude oil. That spread refers to the price of the refining outputs from a barrel of crude and the price of crude. When a barrel is much cheaper than the sum of its parts, refiners do very well. That’s why TSO has been on a rampage all year. The company has a market cap of $13.4 billion and currently holds a Zacks Rank #2.
Moreover, analysts have become increasingly bullish on the company over the past month, with 6 upward estimate revisions for the company’s 2015 earnings. This has led to a sharp spike in the Zacks Consensus Estimate for 2015, which now stands at $13.86, up from $12.36 a month ago.
Texas Instruments Inc. (TXN)
Texas Instruments Incorporated designs, manufactures and sells semiconductors to electronics designers and manufacturers globally. The chipmaker continues to prudently invest into several high-margin, high-growth areas of the analog and embedded processing markets. This will lead to a gradually increase in its exposure to the industrial and automotive markets, which will boost its operations in the coming times.
The company has a market cap of $58.5 billion and currently holds a Zacks Rank #1.
Over the past month, analysts have become increasingly bullish on the company, with 18 upward estimate revisions for the company’s 2015 earnings. This has led to a sharp spike in the Zacks Consensus Estimate for 2015, which has increased from $2.56 a month ago stands to $2.71 today.
Let’s Go All Out
Whether you are looking to beat a hot market or maneuver a period of volatility, these are the right picks for you. The positive momentum in the stock price, blended with bullish analyst interest, could just have uncovered runaway stocks that might rally strongly in the months to come.
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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
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