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5 Momentum Stocks for Keeping Your Portfolio Warm This Chilly Winter

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Avisekh Bhattacharjee
·6 min read
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The financial markets have been on a rollercoaster ride this year, with the Wall Street plunging to pandemic-led record lows in late March to an impressive recovery in the fourth quarter. Year to date, the three major stock indexes — the S&P 500, the Dow and the Nasdaq Composite — have recorded an increase of 20.2%, 6.1% and 41.7%, respectively.

The uptick in the market is likely to continue in 2021, driven by a stronger economy, improving business conditions and healthy customer spending, ably supported by the stimulus package and vaccine rollouts. To capitalize on the positive market trend, investors should consider focusing on momentum stocks that have strong potential and the requisite wherewithal to earn lucrative returns.

Before we discuss about five such momentum stocks that investors could bet on, it is worth looking at the factors that are likely to continue driving the market’s northbound movement.

Key Market Drivers

With the gradual reopening of global markets, the U.S. GDP witnessed a dramatic turnaround to grow 33.4% in the third quarter of 2020, following a 31.4% contraction in the second quarter. The trend is likely to continue on the back of steady improvement in productions, growth in domestic and international orders for industrial products, healthy consumer spending as well as the growing e-commerce business. Also, the housing market have been robust, thanks to the low mortgage rates. The Atlanta Fed’s latest report of Dec 23 suggests that the U.S. GDP will increase 10.4% in the fourth quarter of 2020.

Also, the consistent decline of unemployment rate from 14.7% in April to 6.7% in November suggests that the economic recovery is well on its track. Several industries have been witnessing job additions including transportation and warehousing, healthcare, professional and business services, manufacturing and construction.

Over the past few months, the gradual easing of the pandemic-led lockdown has also significantly boosted personal spending, the biggest driver of economic growth in the United States. In addition, the newly signed coronavirus-aid package worth $900 billion, aimed at bolstering the pandemic-stricken economy, is likely to support the uptrend.

In addition, the optimism surrounding the COVID-19 vaccine and the Fed’s decision to keep interest rates near zero as part of routing the economy back on track will continue to support the market.

Top Picks

We have selected five momentum stocks that have soared more than 25% on a year-to-date basis. The stocks’ earnings estimates have been raised in the past 30 days. These stocks, carrying either a Zacks Rank #1 (Strong Buy) or 2 (Buy), has a Momentum Score of A.  You can see the complete list of today’s Zacks #1 Rank stocks here.

FedEx Corporation FDX: Headquartered in Memphis, TN, FedEx is the leader in global express delivery services. The company stands to benefit from a surge in demand for residential delivery services and business-to-business delivery services, strong liquidity position and its shareholder-friendly policies.

The Zacks Rank #1 company has an expected earnings growth rate of 79.2% for fiscal 2021 (ending May 2021). Notably, in the past 30 days, its earnings estimates for fiscal 2021 and fiscal 2022 (ending May 2022) have been increased 10.5% and 8.9%, respectively. Year to date, the stock price has surged 75.6%.



TE Connectivity Ltd. TEL: The Schaffhausen, Switzerland-based company manufactures and designs products that connect and protect the flow of power and data inside millions of products used by consumers and industries. Strong momentum across data centers, improvement in the housing market and its global manufacturing strategy are acting as tailwinds. Further, solid momentum across hybrid and electric vehicle platform technology, and recovering auto production are positives.

The Zacks Rank #2 company has an expected earnings growth rate of 23.5% for fiscal 2021 (ending September 2021). Its earnings estimates for fiscal 2021 and fiscal 2022 (ending September 2022) have been raised 1% and 1.4%, respectively, in the past 30 days. The stock price has increased 25.9% on a year-to-date basis.



Parker-Hannifin Corporation PH: Based in Cleveland, OH, Parker-Hannifin is a global diversified manufacturer of motion & control technologies and systems. The company provides precision engineered solutions for a wide variety of mobile, industrial and aerospace markets. It will likely gain from strength in its end markets including life science, semiconductor, military, aerospace, rail and power generation. Also, synergistic gains from acquired assets are expected to be beneficial. In addition, its unique Win Strategy and several cost-control measures are likely to aid.

The Zacks Rank #2 company has an expected earnings growth rate of 12.9% for fiscal 2021 (ending June 2021). Its earnings estimates for fiscal 2021 and fiscal 2022 (ending June 2022) have been increased 3% and 0.8%, respectively, in the past 30 days. Year to date, it has gained 31.6%.



Lennar Corporation LEN: Headquartered in Miami, FL, Lennar is engaged in homebuilding and financial services in the United States. The company stands to benefit from higher demand for new homes backed by declining mortgage rates and low inventory levels. Also, its dynamic pricing model along with its cost control measures and solid liquidity position are other tailwinds.

The Zacks Rank #1 company has an expected earnings growth rate of 8.3% for the fiscal 2021 (ending November 2021). Notably, in the past 30 days, its earnings estimates for fiscal 2021 and fiscal 2022 (ending November 2022) have been increased by 7.6% and 8.9%, respectively. Year to date, the stock price has surged 41.1%.



AGCO Corporation AGCO: The Duluth, GA-based company is a leading manufacturer and distributor of agricultural equipment and related replacement parts. It is poised to gain from stabilization of U.S farm sector on the back of improved farm income and pickup in commodity prices. Going forward, its investments in technology, product innovations, smart farming solutions and cost-control initiatives are likely to drive margins.

The Zacks Rank #1 company has an expected earnings growth rate of 16% for 2020. Its earnings estimates for 2020 and 2021 have been raised 0.4% and 3.4%, respectively, in the past 30 days. The stock price has surged 32.4% on a year-to-date basis.

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 >>


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
 
AGCO Corporation (AGCO) : Free Stock Analysis Report
 
TE Connectivity Ltd. (TEL) : Free Stock Analysis Report
 
FedEx Corporation (FDX) : Free Stock Analysis Report
 
ParkerHannifin Corporation (PH) : Free Stock Analysis Report
 
Lennar Corporation (LEN) : Free Stock Analysis Report
 
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