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5 Top Momentum Stocks to Buy in May Despite Coronavirus Concerns

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The global economy is reeling under coronavirus-induced uncertainties since mid-January. The economic devastation has led to the collapse of stock markets and Wall Street is no exception.

However, April was an exception as Wall Street witnessed the best monthly return in more than five decades. Several momentum stocks popped last month. Meanwhile, a handful of them, with a favorable Zacks Rank, are poised to maintain momentum in the near term.

An Excellent April

Last month was an impressive one for Wall Street. The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — rallied 11.1%, 12.7% and 15.5%, respectively, in April. For both the Dow and the S&P 500, it was the best April since 1938 while the Nasdaq Composite witnessed the best April in its history.

The S&P 500 recorded its third best monthly performance and the best one since January 1987. The Dow posted its fourth best monthly performance and the best one since January 1987. Meanwhile, the Nasdaq Composite registered the best monthly performance since 2000.

Momentum Likely to Continue

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-led woes are persisting in the United States and globally and consequently market volatility is still high, 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. Moreover, gradual reduction of new COVID-19 cases and the possibility of the U.S. and global economy opening phase by phase after 2 - 3 months of lockdowns will instill confidence in market participants.

Upward Revision of EPS Estimates - A Crucial Indicator

An upward earnings per share estimate revision for 2020 of any stock simply means the market is expecting these companies to do good business this year. However, in the past 60 to 30  days most stocks witnessed either negative EPS revisions or remained flat due to the coronavirus pandemic.

Meanwhile,  a positive EPS estimate revision during this historic financial turmoil highlights the solid business model and robust growth potential of these companies. Investors can certainly take a look at these stocks as these currently have strong earnings momentum.

Our Top Picks

We have narrowed down our search to five momentum stocks that gained in April. All these stock witnessed robust earnings estimate revisions in the last 7 to 30 days and have solid growth potential. Each of our picks carries a Zacks Rank #1 (Strong Buy) and has a Momentum Score of A.  You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart beow shows the price performance of our five picks in April.

 

MarketAxess Holdings Inc. MKTX is a leading multi-dealer trading platform that offers institutional investors access to global liquidity in products like U.S. high-grade corporate bonds, emerging markets and high-yield bonds, European bonds, U.S. agency bonds, credit derivatives and other fixed-income securities. The company has an expected earnings growth rate of 27.4% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 5.4% over the past 7 days. The stock jumped 36.2% in April.

ASE Technology Holding Co. Ltd. ASX provides a range of semiconductors packaging and testing, and electronic manufacturing services in the United States, Taiwan, Asia, Europe and internationally. The company has an expected earnings growth rate of 48% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 2.8% over the past 7 days. The stock climbed 23.2% in April.

National General Holdings Corp. NGHC provides personal and commercial automobile insurance, recreational vehicle and motorcycle insurance, supplemental health insurance products and other niche insurance products. It operates in two segments, Property and Casualty and Accident and Health. The company has an expected earnings growth rate of 16.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 1.3% over the past 7 days. The stock surged 19.6% in April.

PennyMac Financial Services Inc. PFSI is engaged in the mortgage banking and investment management activities in the United States. It operates through three segments: Loan Production, Loan Servicing and Investment Management. The company has an expected earnings growth rate of 106.1% for the current-year. The Zacks Consensus Estimate for current year earnings has improved by 23.1% over the past 30 days. The stock rallied 63.1% in April.

Silgan Holdings Inc. SLGN manufactures and sells rigid packaging for consumer goods products in North America, Europe, and internationally. It operates through three segments: Metal Containers, Closures, and Plastic Containers. The company has an expected earnings growth rate of 11.6% for the current year. The Zacks Consensus Estimate for current-year earnings has improved by 4.8% over the past 30 days. The stock advanced 19.8% in April.

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Silgan Holdings Inc. (SLGN) : Free Stock Analysis Report
 
MarketAxess Holdings Inc. (MKTX) : Free Stock Analysis Report
 
Advanced Semiconductor Engineering, Inc. (ASX) : Free Stock Analysis Report
 
National General Holdings Corp (NGHC) : Free Stock Analysis Report
 
PennyMac Financial Services, Inc. (PFSI) : Free Stock Analysis Report
 
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