For Immediate Release
Chicago, IL – August 25, 2022 – Stocks in this week’s article are Otter Tail Corp. OTTR, Marten Transport, Ltd. MRTN and Avis Budget Group, Inc. CAR.
3 Momentum Anomaly Picks as Markets Remain Wary of Fed Hike
The broader equity indices witnessed a downtrend in the past couple of trading sessions as investors feared another aggressive round of Fed interest hike to cool down the economy. The decline was reportedly the worst in the past two months amid the faltering bear market rally. With uncertainty becoming the norm of the day, investors often seek to employ time-tested winning strategies to fetch sustained profits. One of the most successful game plans to beat the blues is to bet on momentum stocks when value or growth investing fails to generate the desired profits.
This approach primarily tends to follow the adage, “the trend is your friend.” At its core, momentum investing is “buying high and selling higher.” It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction because of the momentum that is already behind it. But before we delve deep into it, let us try to fathom why the momentum strategy at all works?
There are several behavioral biases that most investors exhibit in their decision-making. And these emotional responses, or rather mistakes, are the very reason that makes momentum strategy work.
For example, some investors are anxious about booking losses and hence hold on to losing stocks for too long, hopeful of a rebound in prices. On the other hand, a few investors sell their winners way too early. Momentum investing is one of the best strategies to avoid making such errors in judgment.
Furthermore, investors initially tend to underreact to news, events or data releases. However, once things become clear, they have a habit of going with the flow and overreacting, causing dramatic price reactions. These behavioral problems extend trends, thus opening up huge opportunities for momentum players.
To sum up, momentum investing is a way to profit from the general human tendency to extrapolate current trends into the future. It is based on that gap in time before the mean reversion occurs, i.e., before prices become rational again.
In this context, stocks like Otter Tail Corp., Marten Transport, Ltd. and Avis Budget Group, Inc. are worth betting on.
Momentum strategies have been known to be alpha-generative over a long period and across market stages. So, this strategy is quite tricky to implement, as detecting these trends is no child’s play.
Here, we have created a strategy to help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
Here are the three of the five stocks that made it through this screen:
Headquartered in Fergus Falls, MN, Otter Tail Corp. engages in diversified operations, including electric utility and manufacturing businesses. It classifies its operations into three segments: Electric, Manufacturing and Plastics. Otter Tail has gained 47.5% in the past year but declined 3.8% in the past week. It has a Momentum Score of B.
Headquartered in Mondovi, WI, Marten Transport, Ltd. operates as a temperature-sensitive truckload carrier for shippers in the United States, Canada and Mexico. It specializes in transporting and distributing food, beverages and other consumer packaged goods that require a temperature-controlled or insulated environment. The stock has appreciated 39.5% in the past year but declined 1.4% in the past week. It has a Momentum Score of B.
Headquartered in Parsippany, NJ, Avis Budget Group is a leading vehicle rental operator in North America, Europe and Australasia, with an average rental fleet of nearly 650,000 vehicles. The company is a leading global provider of mobility solutions through its three most recognized brands — Avis, Budget and Zipcar. The company has licensees in approximately 175 countries throughout the world. The stock has appreciated 89.8% in the past year but declined 5.1% in the past week. It has a Momentum Score of A.
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For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1971701/3-momentum-anomaly-picks-as-markets-remain-wary-of-fed-hike
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Avis Budget Group, Inc. (CAR) : Free Stock Analysis Report
Otter Tail Corporation (OTTR) : Free Stock Analysis Report
Marten Transport, Ltd. (MRTN) : Free Stock Analysis Report
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