5 Momentum Stocks Bargain Hunters Would Love Chasing
The year 2020 turned out to be one of pain, intense volatility and unprecedented turmoil caused by the COVID-19 pandemic. Despite that, Wall Street has pleasantly surprised investors with its performance in the past year. Bouncing back from their lows in March, the Dow Jones Industrial Average and the S&P 500 closed out 2020 at record highs — reflecting annual gains of 7.2% and 16.3%, respectively. The Nasdaq Composite, the other major index, gained 43.6% to log its best year since 2009.
What’s more, market's north-bound movement is likely to continue in 2021 based on FDA's emergency use authorization of two coronavirus vaccines in December, the introduction of a fresh round of economic stimulus package and a brightening U.S. economic outlook.
Factors that Could Drive the Rally Forward
Markets have been rallying for the past few months on continued vaccine-related developments that offer hope for an earlier-than-expected pickup in economic activity and business travel. Following a flurry of positive updates, the FDA, last month, granted emergency use authorization to the Pfizer PFE-BioNTech BNTX and Moderna’s MRNA COVID-19 vaccines. The move is being seen as big step against the pandemic that crushed the demand for goods/services and caused a bloodbath in stocks. A vaccine is expected to revive economic and transport activity in 2021, leading to stronger demand and investment.
Much of the positive argument is simply a bet on stronger economic growth in America and the subsequent improvement in consumer spending. Following the epic 31.4% contraction in the April-June period, the U.S. GDP rebounded a record 33.4% in the third quarter. Per estimates from the Federal Reserve Bank of Atlanta, the U.S. economy is likely to grow at an impressive rate of 10.4% in the fourth quarter. The recently approved $900 billion stimulus package should further bolster the economy. Against this positive economic backdrop, personal spending — the largest component of the U.S. GDP — is expected to improve.
Momentum Investing in Focus
To tap the market’s rally, one could use momentum as an investing strategy. Momentum investing looks to fetch profits from hot stocks that have shown an uptrend over the past few weeks or months. In other words, while investors will essentially be buying high, they hope to sell even higher.
We have narrowed down our search to five momentum stocks. 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 are taken into consideration. This offers an opportunity to enter the market and grab stocks that have otherwise been overlooked by most, and are thus trading at cheap multiples.
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 2020.
Winnebago Industries, Inc. WGO: Winnebago Industries is a leading producer of recreational vehicles in the United States. The company has been riding on the strength of its acquisitions, which bolstered its footprint and diversified its portfolio in the outdoor lifestyle market. Winnebago’s strong balance sheet and record backlog of new orders are its other positives.
The fiscal 2021 Zacks Consensus Estimate for this Eden Prairie, MN-based company indicates 129.1% earnings per share growth over fiscal 2020. Winnebago has a Value Score of B.
Lennar Corporation LEN: Founded in 1954 and based in Miami, FL, Lennar Corporation is engaged in homebuilding and financial services in the United States. The company’s recent results reflect effective cost control and focus on making its homebuilding platform more efficient, which in turn led to higher operating leverage. Higher demand for new homes backed by declining mortgage rates and low inventory levels bode well too.
Over 30 days, Lennar has seen the Zacks Consensus Estimate for its fiscal 2021 earnings improve 7.6%. The company has a Value Score of B.
Williams-Sonoma, Inc. WSM: Founded in 1956 and headquartered in San Francisco, CA, Williams-Sonoma is a multi-channel specialty retailer of premium-quality home products. Looking ahead, continued enhancement of e-commerce channel, optimization of supply chain and disciplined cost control are expected to drive the company’s growth.
The fiscal 2021 Zacks Consensus Estimate for Williams-Sonoma indicates 73.4% earnings per share growth over fiscal 2020. The company has a Value Score of B.
Fiat Chrysler Automobiles FCAU: The carmaker’s customer-tailored new models and successful product launches stand it in good stead. Fiat Chrysler is also working on an ambitious plan to electrify its portfolio in a bid to take its EV game a notch higher and has committed to offer electrified options across its Jeep lineup and invest $10.5 billion in electrification by 2022.
Over 30 days, the Italian-American automaker has seen the Zacks Consensus Estimate for 2021 improve 54.1%. Fiat Chrysler has a Value Score of A.
FedEx Corp. FDX: Founded in 1971, FedEx is the leader in global express delivery services. The company has been benefiting from a surge in e-commerce demand during the current coronavirus-ravaged times. A spike in demand for residential delivery services and business-to-business delivery services, strong liquidity position and shareholder-friendly policies are the other positives in the FedEx story.
The fiscal 2021 Zacks Consensus Estimate for this Memphis, TN-based company indicates 79.2% earnings per share growth over fiscal 2020. FedEx has a Value Score of B.
Zacks Top 10 Stocks for 2021
In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2021?
These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Start Your Access to the New Zacks Top 10 Stocks >>
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Pfizer Inc. (PFE) : Free Stock Analysis Report
Moderna, Inc. (MRNA) : Free Stock Analysis Report
FedEx Corporation (FDX) : Free Stock Analysis Report
WilliamsSonoma, Inc. (WSM) : Free Stock Analysis Report
Lennar Corporation (LEN) : Free Stock Analysis Report
Fiat Chrysler Automobiles N.V. (FCAU) : Free Stock Analysis Report
Winnebago Industries, Inc. (WGO) : Free Stock Analysis Report
BioNTech SE Sponsored ADR (BNTX) : Free Stock Analysis Report
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