Wall Street has been facing choppy trading sessions almost regularly this month following the resurgence of coronavirus in several major states of the United States threatening the much-hyped V-shaped recovery of the economy in the second half of this year.
Although the three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — are in positive territory, so far this month, volatility remains a major concern for investors. Despite the market’s roller-coaster ride, a handful of momentum stocks with a favorable Zacks Rank have provided more than 20% returns so far in July. These stocks have more upside left in the near term.
A spike in new coronavirus cases in as many as 24 states, unavailability of vaccine, intensifying U.S.-China tensions and a delay in the second round of fiscal stimulus by the government led to regular market fluctuations.
Moreover, for 18 consecutive weeks, initial jobless claims stood at more than 1.3 million. The Conference Board reported that U.S. consumer confidence dropped to 92.6 from the upwardly revised data of 98.3 in June. Notably, the expectations sub-index — defining consumer’s expectation for the next six months — dropped to a four-month low of 91.5 in July from 106.1 in June.
Momentum Likely to Continue Despite Pandemic
Momentum investing calls for continued appraisal of stocks, which ensures that an investor does not pick a beaten-down name and overlook a thriving one. Momentum investors buy high on the anticipation that the stock will only ascend in the short to intermediate term.
Although coronavirus-induced woes are persisting in the United States and globally, causing severe market volatility, the overall movement of the stock market is likely to remain northbound.
Market’s worst is behind us as negative estimates are already factored in market valuation. Despite the second surge of COVID-19, the U.S. economy is not likely to face lockdowns once again. Moreover, a series of economic data from the last quarter has indicated that the pandemic-led devastations may not be as ruthless as previously expected.
Upward Revision of EPS Estimates – A Crucial Indicator
An upward earnings per share (EPS) estimate revision for 2020 of any stock simply means the market is expecting these companies to do good business this year.
A positive EPS estimate revision during the period of historic financial turmoil highlights a solid business model and robust growth potential of these companies. Market participants are likely to be interested in those stocks that have witnessed positive EPS estimate revisions recently — within the last 7 days.
Our Top Picks
We have narrowed down our search to five momentum stocks that have skyrocketed in the past month. All these stocks witnessed robust earnings revisions in the last 7 days and have strong growth potential. Each of our picks carries a Zacks Rank #1 (Strong Buy) and 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 in the past month.
Meritage Homes Corp. (MTH – Free Report) designs and builds single-family homes in the United States. It operates through two segments, Homebuilding and Financial Services. The company has expected earnings growth of 40.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 36% over the last 7 days. The stock price has soared 35.3% in the past month.
MarineMax Inc. (HZO – Free Report) is the largest recreational boat and yacht retailer in the United States. It sells new and used recreational boats, including pleasure boats, motor and convertible yachts, pontoon boats, fishing boats, ski boats and jet boats. The company has an expected earnings growth rate of 55.8% for next year (ending September 2021). The Zacks Consensus Estimate for next year has improved 67.1% over the last 7 days. The stock price has jumped 32% in the past month.
PulteGroup Inc. (PHM – Free Report) is engaged in homebuilding and financial services businesses, primarily in the United States. The company has expected earnings growth of 22.1% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 39.3% over the last 7 days. The stock price has climbed 31.4% in the past month.
Clearfield Inc. (CLFD – Free Report) manufactures, markets and sells standard and custom passive connectivity products to the fiber-to-the-premises, enterprises and original equipment manufacturers markets in the United States and internationally. The company has expected earnings growth of 41.2% for the current year (ending September 2020). The Zacks Consensus Estimate for current-year earnings has improved by 84.6% over the last 7 days. The stock price has rallied 27.8% in the past month.
CyberOptics Corp. (CYBE – Free Report) is a leading provider of sensors and inspection systems that provide process yield and through-put improvement solutions for the global electronic assembly and semiconductor capital equipment markets. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved more than 100% over the last 7 days. The stock price has surged 21.2% in the past month.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Author: Nalak Das
Source: Zacks: Top 5 High-Flying Momentum Stocks of July With More Upside