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Top 5 High-Flying Stocks With Strong Momentum for September

We have narrowed down our search to five large-cap momentum stocks that have provided more than 20% returns year to date. These are: ULTA, DVN, HPQ, M...

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This story originally appeared on Zacks

Wall Street completed an impressive first half of 2021, after a stellar run in 2020 despite the pandemic. The bull run gathered momentum in the first two months of the second half also. Year to date, the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — have rallied 15.8%, 20.8% and 19%, respectively.

- Zacks

The market’s benchmark — the S&P 500 Index — ended the first eight months of 2021 with its strongest year-to-date gain since 1997. The broad-market index also ended in the positive zone for seven months in a row, marking the longest run since the 10-month rally that ended in December 2017. Moreover, in the first eight months of this year, the tech-heavy Nasdaq Composite ended in red only in May. The blue-chip index Dow dropped in January and fell marginally in June.

This shows that Wall Street has remained in the growth trajectory so far this year defying intermittent volatility mainly due to the resurgence of the Delta variant of coronavirus, high inflationary pressure, Fed’s possible tapering of the quantitative easing program, lingering supply-chain disruptions and shortage of labor. The momentum is likely to prevail in the rest of 2021 too.

Major Catalysts

The economic effect of the Delta variant of coronavirus may not be as severe as last year when there was no vaccine. More than 60% of U.S. citizens have already received at least one shot. On Aug 23, the FDA granted the first full approval to a COVID-19 vaccine, which is expected to convince many Americans who are still reluctant to receive a shot.

A possible tapering of the Fed’s monthly $120 billion bond-buying program is not going to shake market participants’ confidence. The central bank had taken this extraordinary measure last year to tackle an extraordinary health hazard-led economic devastation. Everyone knows that this monetary stimulus will fade out gradually with robust U.S. economic recovery.

However, the important point is that the Fed has taken an extremely cautious approach to tapering its bond-buy program. In his Jackson Hole Symposium lecture last month, Fed Chair Jerome Powell clearly said that the existing benchmark interest rate of 0-0.25% will remain the same until the economy achieves substantial progress, especially in the struggling labor market.

Corporate profits soared in the first half of this year. As of Sep 1, total 2021 earnings of the S&P 500 Index were projected to climb 42.5% on 13.1% higher revenues. For 2022 and 2023, the S&P 500's total earnings are likely to grow 8.9% and 10.2% on 6.4% and 4.8% higher revenues, respectively.

Finally, on Aug 24, the House of Representatives advanced a $1 trillion bipartisan infrastructure bill. On Aug 10, the U.S. Senate passed a bipartisan infrastructure bill of $550 billion in addition to the previously approved funds of $450 billion for five years.

Total spending may go up to $1.2 trillion if the plan is extended to eight years. Infrastructure projects such as roads, bridges, passenger rails, airports, drinking water and waste-water systems, high-speed Internet, and climate-related infrastructure should benefit.

Our Top Picks

Momentum investing calls for the continued appraisal of stocks, ensuring that an investor does not pick a beaten-down name or overlook a thriving one. Momentum investors buy high on the anticipation that a stock will only rise in the short to intermediate term.

We have narrowed down our search to five large-cap (market capital > $10 billion) momentum stocks that have provided more than 20% returns year to date. These stocks have strong upside left for the rest of 2021 and witnessed positive earnings estimate revisions within the last 30 days, indicating that the market is currently expecting these companies to do solid business this year.

Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A.  You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows the price performance of our five picks year to date.

Zacks Investment Research

Image Source: Zacks Investment Research

Continental Resources Inc. CLR explores, develops and produces crude oil and natural gas primarily in the north, south, and east regions of the United States. It sells its crude oil and natural gas production to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies. Continental Resources has a premier position in the Bakken area.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 2.7% over the last 7 days. The stock price has soared 137.6% year to date.

Devon Energy Corp. DVN is primarily engaged in the exploration, development, and production of oil, natural gas and natural gas liquids in the United States and Canada. Its diversified portfolio and focus on high-margin assets hold significant long-term growth potential. Devon Energy is focused on advanced technology to produce high oil volumes from wells and implement cost savings initiatives.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 4.2% over the last 30 days. The stock price has rallied 85.4% year to date.

Ulta Beauty Inc. ULTA operates as a retailer of beauty products in the United States. The company has been seeing market share gains in major beauty categories for a while now, with skincare standing out. Its foremost priority is to strengthen its omnichannel business and explore the potential of both physical and digital facets.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 9.8% over the last 7 days. The stock price has jumped 32.7% year to date.

Markel Corp. MKL is a diverse financial holding company that markets and underwrites specialty insurance products in the United States, Bermuda, the United Kingdom, rest of Europe, Canada, Latin America, the Asia Pacific, and the Middle East. It strives to grow through acquisitions and organic initiatives as these not only diversify and strengthen its portfolio but also expand its international footprint.

The company has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings improved 3.1% over the last 7 days. The stock price has climbed 22.4% year to date.

HP Inc. HPQ is benefiting from solid demand for Personal Computers amid the pandemic-led remote-working and online-learning wave. Recently reported earnings reflect a strong rebound in the Printing business. Furthermore, stringent cost control measures are expected to drive margin over the long run.

The company has an expected earnings growth rate of 63.6% for the current year (ending October 2021). The Zacks Consensus Estimate for current-year earnings improved 6.6% over the last 7 days. The stock price has surged 20.4% year to date.



Tech IPOs With Massive Profit Potential: Last years top IPOs surged as much as 299% within the first two months. With record amounts of cash flooding into IPOs and a record-setting stock market, this year could be even more lucrative. 

See Zacks’ Hottest Tech IPOs Now >>



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

 

HP Inc. (HPQ): Free Stock Analysis Report

 

Devon Energy Corporation (DVN): Free Stock Analysis Report

 

Ulta Beauty Inc. (ULTA): Free Stock Analysis Report

 

Markel Corporation (MKL): Free Stock Analysis Report

 

Continental Resources, Inc. (CLR): Free Stock Analysis Report

 

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