Most of the stocks ended 2015 on a dismal note due to several global concerns such as decline in oil prices, slowdown in the Chinese economy and the strengthening U.S. dollar. The scenario has not changed much this year too.
The ongoing global market instability has led several economies to step-up their stimulus plans.
The European Central Bank (ECB) announced its decision to expand bond-buying stimulus program, and the Bank of Japan (BOJ) adopted negative interest rates to boost the economy of their respective countries. Additionally, China’s central bank stepped up its efforts to arrest the economic slowdown and any further devaluation of the currency.
The Fed is also advancing cautiously. On Mar 16, the Federal Open Market Committee (FOMC) decided to keep interest rate between 0.25% and 0.50%. Also, the committee revised the number of rate hikes to two from four, as projected at its December meeting, citing "global and financial developments continue to pose risks."
These positive steps taken by various countries boosted investors’ confidence to some extent. In the last one month, Dow Jones Industrial Average DJI, NASDAQ Composite IXIC and S&P 500 GSPC gained 4.84%, 3.53% and 3.54%, respectively.
In terms of the year-to-date (YTD) return, the Dow Jones and S&P 500 indices gained a respective of 1.67% and 0.98%, while NASDAQ reported a negative 2.76%.
Among the various sectors, technology has remained one of the outperformers with Technology Select Sector SPDR ETF XLK registering YTD and one-month return of 3.78% and 5.06%, respectively.
Launched in Dec 1998, XLK is a passively managed fund designed to deliver the returns of the U.S. technology stocks. The fund, before expenses, seeks to closely match the returns and characteristics of the S&P Technology Select Sector Index.
In view of these bullish sentiments, momentum investing can be a winning strategy for those looking for high returns in a short time. This is because the strategy focuses on hot stocks that have been gaining over the past few weeks or months.
Today, we’ve zeroed-in on some tech stocks using our premium screen “Momentum Style Score.”
What's the Momentum Style Score?
The Momentum Style Score theory states that what has been going up so far will possibly continue to do so in the near future. This indicates the time to buy a stock that is likely to witness share price rise. Nothing is more frustrating than watching a fundamentally sound or inexpensive stock remaining stagnant.
Momentum investors thus strongly believe “the trend is your friend,” which implies that stocks that are growing will continue to grow. They make short-term choices among stocks that are scaling up and sell them at the first sign of a downtrend. The basic idea is that once a trend is recognized, it is likely to retain that direction and not move against the flow.
Thus, gambling on momentum stocks might help investors earn higher returns in the short term. Nevertheless, investors should remember that this is a speculative strategy and not meant for the faint hearted.
Where to Put Your Money?
Finding the right momentum stocks is not easy due to market volatility, but if executed properly, momentum stocks can bring in hefty returns.
It is here that our new Style Score System can come in handy. The Zacks Momentum Style Score indicates when the timing is right to grab a stock and make the most of its momentum. 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 others.
Here is the list of four best tech stocks for momentum investors right now:
3D Systems Corporation DDD
3D Systems is a leading provider of 3-D Modeling, Rapid Prototyping and Manufacturing solutions. The current-year earnings per share (EPS) estimate has been revised upward to 16 cents from a break-even over the past 30 days. The EPS growth estimate is 77.8% for the current year, compared with the industry average of negative 10.9%. The Rock Hill, SC-based company gained 30.7% value in the last one month and has a Momentum Style Score of A.
Stratasys Ltd. SSYS
Eden Prairie, MN-based Stratasys manufactures 3D printers and materials. The company’s Zacks Consensus Estimate for 2016 has improved to a loss per share of 20 cents from a loss of 56 cents over the last 30 days. The EPS growth estimate is 11.3% for the current year, as against the industry average of negative 10.9%. The company gained 20.3% value in the last one month and has a Momentum Style Score of A.
Adobe Systems Inc. ADBE
Adobe Systems is a provider of graphic design, publishing, and imaging software for Web and print production. The San Jose, CA-based company’s current-year EPS estimate moved 2.3% up over the past 30 days. The stock has a current-year EPS growth estimate of a whopping 50.2%, compared with the industry average of negative 8%. Adobe gained 6.1% share price in the last one month and carries a Momentum Style Score of A.
NetEase Inc. NTES
NetEase is an Internet technology company engaged in the development of applications, services and other technologies in China. The stock’s current-year EPS estimate went up 19% over the past 60 days. The stock has a current-year EPS growth estimate of 17.5%, compared with the industry average of negative 8%. The shares of NetEase gained 4.9% in the last one month and carry a Momentum Style Score of A.
Looking Ahead
The abovementioned stocks have grabbed the spotlight with striking performances supported by solid earnings results and strong growth projections. With this in mind, we believe investing in these stocks would yield strong returns for your portfolio in the short term.
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