Momentum ETFs & Stocks to Buy Now
After the worst week in many months triggered by Fed’s hawkish stance, Wall Street rebounded on reopening trade and economic recovery bets. Investors strongly believe that the economy is on a strong recovery path and that piled back into stocks set to benefit from a broader economic recovery.
With millions of Americans fully vaccinated and pandemic restrictions being rolled back, consumer confidence has risen. The expanded stimulus, signs of job growth and strong corporate earnings are also providing strength to the stocks. Additionally, the bouts of latest data are bolstering investors’ confidence, driving the stocks higher. Notably, U.S. manufacturing activity hit a record high in May for the second straight month supported by stronger expansion in output and new orders. U.S. consumer sentiment also rebounded in early June as inflation fears subsided and households grew more optimistic about future economic growth and employment.
Although the Fed has signaled two rate hikes by the end of 2023, it said that the progress in vaccination has reduced the spread of COVID-19 in the United States, and economic activity and employment have strengthened. It raised the GDP growth forecast from 6.5% to 7% for this year, which would be the fastest calendar-year expansion since 1984 (read: Fed Rate Hike in the Cards? ETFs to Buy).
Against this backdrop, momentum investing would be a winning strategy for those seeking higher returns in a short spell. This is because the strategy seeks to capitalize on the continuance of an existing market trend. It looks to fetch profits from buying hot stocks that have shown an uptrend over the past few weeks or months.
As such, we have presented five ETFs and stocks that could lead to outperformance in the current market environment. Further, these could even beat broader market returns in the coming months if the trend prevails.
ETF Picks
iShares Edge MSCI USA Momentum Factor ETF MTUM
This fund provides exposure to large and mid-cap stocks that exhibit relatively higher price momentum by tracking the MSCI USA Momentum SR Variant Index. It charges 15 bps in fees per year and is the popular choice with AUM of $14.7 billion.
Invesco DWA Momentum ETF PDP
This fund tracks the Dorsey Wright Technical Leaders Index, which measures the performance of companies that demonstrate powerful relative strength characteristics. It has amassed $1.7 billion in its asset base and charges 62 bps in annual fees (read: ETF Strategies to Play the Drop in New US COVID-19 Cases).
Invesco S&P MidCap Momentum ETF XMMO
This ETF follows the S&P Midcap 400 Momentum Index, which is designed to identify mid-cap firms having the highest momentum scores. It has AUM of $902.9 million and charges 34 bps in annual fees. It has a Zacks ETF Rank #1 (Strong Buy).
Invesco S&P SmallCap Value with Momentum ETF XSVM
This fund offers exposure to the companies having the highest "value scores" and "momentum scores" by tracking the S&P 600 High Momentum Value Index. It holds a basket of 139 stocks with AUM of $483.1 million and charges 39 bps in annual fees. The product has a Zacks ETF Rank #3 (Hold) (read: The Hottest Value Stock ETFs to Buy Now).
Invesco DWA SmallCap Momentum ETF DWAS
With AUM of $481.6 million, this ETF offers exposure to the small-cap segment of the broad U.S. stock market with powerful relative strength characteristics. It follows the Dorsey Wright SmallCap Technical Leaders Index, charging 60 bps in annual fees per year.
Stock Picks
General Motors Company GM
It is one of the world’s largest automakers leading the U.S. market share with 17.1% of the industry’s total sales in 2020. The stock saw solid earnings estimate revision of 60 cents over the past 30 days for this year with an estimated growth rate of 20.2%. It has a Zacks Rank #1 and Momentum Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Dow Inc. DOW
This material science company is engaged in providing a world-class portfolio of advanced, sustainable and leading-edge products. The stock saw solid earnings estimate revision of 70 cents over the past 30 days for this year with an estimated growth rate of 303.6%. It has a Zacks Rank #2 and Momentum Score of A.
Nucor Corporation NUE
It is a leading producer of structural steel, steel bars, steel joists, steel deck and cold finished bars in the United States. The stock witnessed solid earnings estimate revision of $3.89 over the past 30 days for this year and has an estimated growth rate of 344.9%. It has a Zacks Rank #1 and Momentum Score of A.
Hess Corporation HES
This global integrated energy company is engaged in exploration, production, development, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas. It saw earnings estimate revision of 26 cents for this year over the past 30 days and has an estimated earnings growth rate of 159%. Hess Corporation has a Zacks Rank #1 and Momentum Score of A (read: Bet on Energy Sector With Leveraged ETFs).
DICKS Sporting Goods Inc. DKS
This company operates as a major omni-channel sporting goods retailer, offering athletic shoes, apparel, accessories and a broad selection of outdoor and athletic equipment for team sports, fitness, camping, fishing, tennis, golf, water sports, etc. It has seen whopping earnings estimate revision of $3.25 for the fiscal year (ending Jan 2022) in a month and has an estimated earnings growth of 34.8%. The stock has a Zacks Rank #1 and Momentum Score of A.
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Nucor Corporation (NUE) : Free Stock Analysis Report
Hess Corporation (HES) : Free Stock Analysis Report
Dow Inc. (DOW) : Free Stock Analysis Report
DICKS Sporting Goods, Inc. (DKS) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
iShares MSCI USA Momentum Factor ETF (MTUM): ETF Research Reports
Invesco DWA SmallCap Momentum ETF (DWAS): ETF Research Reports
Invesco DWA Momentum ETF (PDP): ETF Research Reports
Invesco S&P MidCap Momentum ETF (XMMO): ETF Research Reports
Invesco S&P SmallCap Value with Momentum ETF (XSVM): ETF Research Reports
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