4 Momentum Stocks That Show No Signs of Slowing Down
With investors awaiting the outcome of the Fed’s policy meeting this week, and with an ongoing liquidity crisis at China’s Evergrande Group, the marke...
With investors awaiting the outcome of the Fed’s policy meeting this week, and with an ongoing liquidity crisis at China’s Evergrande Group, the market is expected to remain turbulent in the near term. So, we think it could be wise to invest in KLA Corporation (KLAC), Fujitsu Limited (FJTSY), NTT DATA Corporation (NTDTY), and Software Enterprises (MGIC) because these stocks have been able to advance consistently in recent months and are well-positioned to maintain their momentum for the foreseeable future. So, let’s examine these names.
Market volatility is expected to remain high for the foreseeable future, as investors await the results of this week’s much-anticipated Fed meeting, during which officials are expected to reveal their plans to begin withdrawing assistance to the economy. Furthermore, market experts believe that the current liquidity crisis at China's Evergrande Group, which has jolted global markets, could cause even more volatility in the coming weeks.
Against this backdrop, we think investors could dodge the rising volatility by investing in stocks that have already gained substantial momentum, which they have the potential to maintain owing to their strong fundamentals and solid growth prospects. Investors’ confidence in momentum stocks is evidenced by the Invesco DWA Momentum ETF’s (PDP) 5.8% returns over the past three months.
KLA Corporation (KLAC), Fujitsu Limited (FJTSY), NTT DATA Corporation (NTDTY), and Magic Software Enterprises Ltd. (MGIC) have generated robust momentum, which we think they are well-positioned to maintain in the coming months. So, it could be wise to bet on these stocks now.
KLA Corporation (KLAC)
KLAC is a global semiconductor and nanoelectronics company that designs, produces, and distributes process control and yield management products. The Milpitas, Calif.-based company offers products and services to bare wafer, integrated circuit, reticle, and hard disc drive manufacturers.
In June, KLAC unveiled four new products for automotive chip manufacturing: the 8935 high productivity patterned wafer inspection system; the C205 broadband plasma patterned wafer inspection system; the Surfscan SP A2/A3 unpatterned wafer inspection systems; and its I-PAT inline defect part average testing screening solution. Since semiconductor chips are at the core of automotive safety applications and operations, this new portfolio should help the company provide high yield, reliability, and performance to support the automotive electronics ecosystem.
For its fiscal year ended June 30, 2021, KLAC’s revenue increased 19.2% year-over-year to $6.92 billion. Its cash and cash equivalents surged 26% year-over-year to $2.49 billion, while its net income grew 70.8% from the prior-year quarter to $2.08 billion. The company’s EPS increased 73.6% year-over-year to $13.37 over this period.
The $19.23 consensus EPS estimate for the current year represents a 32.2% improvement year-over-year. Likewise, the $8.61 billion consensus revenue estimate for the current year represents a 24.5% increase from the same period last year. KLAC’s stock has gained 37.7% in price year-to-date to close its last trading session at $356.58. Over the past year, the stock has returned 96.9%. KLAC is currently trading above its 50-day and 200-day moving averages of $334.19 and $311.88, respectively.
KLAC's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
KLAC also has an A grade for Quality, and a B for Momentum. Additionally, within the A-rated Semiconductor & Wireless Chip industry, it is ranked #23 of 97 stocks.
To see additional POWR Ratings for Growth, Value, Sentiment, and Stability for KLAC, click here.
Fujitsu Limited (FJTSY)
FJTSY is a Japan-based multinational information and communication technology (ICT) company. It operates through three segments: Technology Solutions; Ubiquitous Solutions; and Device Solutions. It caters to the automotive, manufacturing, retail, financial services, transportation, telecommunications, healthcare industries, and the public and private sectors.
This month, FJTSY and Nippon Yusen Kabushiki Kaisha, a major global shipping company, introduced FJTSY's quantum inspired Digital Annealer technology that can be used to simplify complex stowage planning for car carriers, leveraging the technology's world-class combinatorial optimization capabilities. Both companies aim to contribute to reducing greenhouse gas emissions across the vehicle transportation supply chain by increasing the efficiency of cargo handling and ship operations.
Last month, FJTSY and NEC Corporation began developing interoperability testing technologies between 5G base station equipment at FJTSY's U.S. and NEC's U.K. facilities. Japan's New Energy and Industrial Technology Development Organization (NEDO) will undertake this effort as part of the “Post 5G Infrastructure Enhancement R & R&D Project.” Through this initiative, FJTSY, NEC, and NEDO intend to promote development and innovation in the open 5G industry by accelerating the global reach of base station equipment that meets O-RAN requirements.
During the first quarter, ended June 30, 2021, FJTSY’s operating profit increased 51.5% year-over-year to ¥33.74 billion ($308.36 million). Its net income grew 54.2% from its year-ago value to ¥29.54 billion ($269.96 million), while its EPS surged 33.9% year-over-year to ¥121.47 ($1.11) over this period. In addition, the company’s net cash from operating activities increased 29% from the year-ago value to ¥192.02 billion ($1.75 billion).
FJTSY's revenue is expected to increase 83.3% year-over-year to $33.26 billion in its fiscal year 2021. Over the past year, the stock gained 43.6% in price to close yesterday’s trading session at $38.79. However, FJTSY is trading above its $36.57 and $32.43 respective 50-day and 200-day moving averages.
FJTSY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy. The stock also has an A grade for Value and a B for Momentum and Stability. In the Technology Services industry, it is ranked #3 of 74 stocks.
In total, we rate FJTSY on eight distinct levels. Beyond what we've stated above, we have also given FJTSY grades for Growth, Sentiment, and Quality. Get all the FJTSY ratings here.
NTT DATA Corporation (NTDTY)
NTDTY is a global provider of consulting, system development, and business IT outsourcing services. Public & Social Infrastructure; Financial; Enterprise & Solutions; North America; and EMEA & LATAM are the operational segments of the Koto, Japan-based company. It offers value-added IT services to government, medical, telecommunications, electric power, and other social infrastructure, as well as payment services.
This month, NTDTY announced that it had been granted a contract by the United States Department of Justice (DOJ) to develop a case management system that will modernize the federal submissions process to support the National Instant Criminal Background Mission Check System's (NICS).
Last month, Argonne National Laboratory (Argonne),a multidisciplinary scientific and engineering research facility and the largest U.S. Department of Energy (DoE) laboratory in the United States Midwest, awarded NTDTY a $15.4-million contract to provide better end-user support services.
For its first fiscal quarter, ended June 30, 2021, NTDTY’s net sales increased 11.3% year-over-year to ¥590.82 billion ($5.40 billion). The company’s operating income grew 77.1% year-over-year to ¥47.27 billion ($432.03 million). Its net income increased 62.3% year-over-year to ¥32.58 billion ($283.89 million), while its EPS grew 62.3% from the prior-year quarter to ¥22.15 ($0.20).
Analysts expect NTDTY’s revenue to increase 139.6% year-over-year to $22.12 billion in its fiscal year 2021. NTDTY’s stock has gained 55.2% in price over the past year to close yesterday’s trading session at $20.70. In addition, NTDTY is currently trading above its $17.22 and $15.78 respective 50-day and 200-day moving averages.
NTDTY's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. NTDTY has also been rated an A grade for Stability, and a B for Value and Momentum. Within the Technology Services industry, it is ranked #8 of 74 stocks.
Click here to see additional POWR Ratings for Growth, Quality, and Sentiment for NTDTY.
Magic Software Enterprises Ltd. (MGIC)
MGIC offers proprietary application development, business process integration, vertical software solutions, and information technology (IT) outsourced software services. It serves the oil and gas, telecommunications, financial, healthcare, and industrial sectors, and public institutions, and international agencies. In addition, the Or Yehuda, Israel-based company provides software maintenance, support, training, and consulting services.
MGIC’s non-GAAP revenue increased 37.7% year-over-year to $119.2 million in the second quarter ended June 30, 2021. Its non-GAAP operating income grew 30.2% from its year-ago value to $15.9 million. The company’s non-GAAP net income surged 39.9% from the prior-year quarter to $11.3 million, while its non-GAAP EPS increased 35.9% year-over-year to $0.23.
A $455.53 million consensus revenue estimate for next year represents a 22.7% increase year-over-year. MGIC’s EPS is expected to increase 15.8% year-over-year to $0.88 in its fiscal year 2021. Also, the stock has gained 37.9% over the past nine months to close its last trading session at $20.28. Over the past year, the stock has gained 59.6% in price and is currently trading above its 50-day and 200-day moving averages of $18.89 and $16.82, respectively.
It is no surprise that MGIC has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Sentiment, Stability, and Momentum. In the Software – Application industry, it is ranked #13 of 149 stocks.
In addition to the POWR Ratings grades I have just highlighted, you can see the MGIC ratings for Growth, Value, and Quality.
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KLAC shares were trading at $361.33 per share on Wednesday morning, up $4.75 (+1.33%). Year-to-date, KLAC has gained 40.82%, versus a 18.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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