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5 Momentum Stocks Bargain Hunters Would Love Chasing

Given the prevailing sentiment in the market, Academy Sports (ASO), Avis Budget (CAR), Laboratory Corporation (LH), Penske Automotive (PAG) and West Fraser (WFG) are expected to give handsome returns to...

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This story originally appeared on Zacks

The year 2021 has been eventful for the stock market, though it was less volatile than last year.

Wall Street can be reasonably satisfied with its performance this year. Stocks continue to reach record levels defying all odds. Year to date, the Dow has moved up 19%, the S&P 500 27.7%, the tech-heavy Nasdaq 23.3% and the small-cap Russell 2000 15.2%.

The momentum has been largely driven by the $1.9 trillion U.S. stimulus bill passed in March to get the economy back on track and accelerated COVID-19 vaccination programs. Improving corporate earnings and strong retail participation also provided support.

While the outlook for the macro backdrop and the market remains positive, the going will be choppier in the coming months as the Fed starts to unwind its extraordinary easing policy. Of late, the optimism has somewhat been dented by the Omicron outbreak. Inflation worries, supply bottlenecks and labor shortages also remain concerns.

Any way you look at it, these are historic times. We cannot afford to the miss the boat as there seems to be a lot more upside left entering the New Year.

- Zacks

Focus on Momentum Investing

When value or growth investing fails to fetch sustained profits, one should explore another time-tested winning strategy that bets on frontrunner stocks. One of the most successful strategies in this day and age is to get in on momentum stocks at the right time.

We have all heard the adage, “the trend is your friend”. At the core, momentum investing is “buying high and selling higher”. It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction (than move against the drift) because of the momentum that is already behind it. Momentum strategies have been known to be alpha-generative over a long period and across market stages.

5 Promising Picks

With the help of the Zacks Stock Screener, we have selected five momentum stocks that are expected to give handsome returns to investors. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A. To further cut short the list, stocks with a Value Score of A or B have been taken into consideration. This combination offers an excellent opportunity for momentum players to get their favorite stocks at a low price.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Academy Sports and Outdoors, Inc. ASO: Based in Katy, TX, Academy Sports is a leading full-line sporting goods and outdoor recreation retailer in the United States. It continues to benefit from the strategic initiatives implemented to improve merchandise planning and allocation, operations, customer service and supply chain.

The company delivered a trailing four-quarter earnings surprise of 68.9%, on average. The Zacks Consensus Estimate for its next-year earnings has been revised 9.5% upward over the past 30 days. Academy Sports has a Value Score of A. Year to date, the stock has rallied 93.6% against the industry’s decline of 40.4%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Avis Budget Group, Inc. CAR: Headquartered in Parsippany, NJ, Avis Budget is a leading global provider of mobility solutions, both through its Avis and Budget brands. It is benefiting from initiatives that began during the early days of the pandemic and looks forward to building on this momentum as the travel environment continues to normalize.

The company delivered a trailing four-quarter earnings surprise of 76.9%, on average. The consensus estimate for its next-year earnings has been revised 13.3% upward over the past 30 days. Avis Budget has a Value Score of A. Year to date, the stock has skyrocketed 500.3% compared with the industry’s growth of 103.8%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Laboratory Corporation of America Holdings LH: Headquartered in Burlington, NC, Laboratory Corporation is a leading global life sciences company that provides critical information to help doctors, hospitals, pharmaceutical companies, researchers and patients make clear decisions. It continues to leverage innovation, science and technology to accelerate its business strategy.

The company delivered a trailing four-quarter earnings surprise of 25.7%, on average. The consensus estimate for its next-year earnings has been revised 3.6% upward over the past 30 days. Laboratory Corporation has a Value Score of B. Year to date, the stock has gained 48.4% compared with the industry’s growth of 13.8%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Penske Automotive Group, Inc. PAG: Headquartered in Bloomfield Hills, MI, Penske Automotive is a diversified international transportation services company. It is one of the world’s premier automotive and commercial truck retailers. It is benefiting from strength across all areas of its business, including strong vehicle margins, improving service and parts operations and a growing Class 8 commercial truck market.

The company delivered a trailing four-quarter earnings surprise of 20.3%, on average. The consensus estimate for its next-year earnings has been revised 0.4% upward over the past 30 days. Penske Automotive has a Value Score of A. Year to date, the stock has returned 73.2% compared with the industry’s growth of 30.3%.

Zacks Investment ResearchImage Source: Zacks Investment Research

West Fraser Timber Co. Ltd. WFG: Based in Vancouver, Canada, West Fraser is a diversified wood products company with facilities in Canada, the United States, the United Kingdom and Europe. Its products are used in home construction, repair and remodeling, industrial applications, papers, tissue and box materials. The balance sheet remains strong and continues to afford flexibility to undertake capital investments, repay debt and repurchase shares.

The company pulled off a trailing four-quarter earnings surprise of 13.7%, on average. The consensus estimate for its next-year earnings has been revised 30.6% upward over the past 30 days. West Fraser has a Value Score of B. Year to date, the stock has appreciated 45.1% compared with the industry’s growth of 24.2%.

Zacks Investment ResearchImage Source: Zacks Investment Research

These frontrunners are well-positioned to continue their winning streaks and are currently trading at a bargain. So, make sure you take full advantage of it.

Merry Christmas,

Happy Investing!



Zacks Top 10 Stocks for 2022

In addition to the investment ideas discussed above, would you like to know about our 10 top picks for the entirety of 2022?

From inception in 2012 through November, the Zacks Top 10 Stocks gained an impressive +962.5% versus the S&P 500’s +329.4%. Now our Director of Research is combing through 4,000 companies covered by the Zacks Rank to handpick the best 10 tickers to buy and hold. Don’t miss your chance to get in on these stocks when they’re released on January 3.

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Laboratory Corporation of America Holdings (LH): Free Stock Analysis Report

 

Avis Budget Group, Inc. (CAR): Free Stock Analysis Report

 

Penske Automotive Group, Inc. (PAG): Free Stock Analysis Report

 

Academy Sports and Outdoors, Inc. (ASO): Free Stock Analysis Report

 

West Fraser Timber Co. Ltd. (WFG): Free Stock Analysis Report

 

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Zacks Investment Research