3 Momentum Anomaly Stocks to Buy as Trump Calls Off Iran Strike Plan

The broader U.S. equity markets shrugged off heightened market volatility and moved higher over the past couple of days as oil prices receded from peak levels and President Trump called off his planned strikes against Iran. The rally was also induced by a strong performance by Microsoft and some other leading semiconductor firms. 

With Federal Reserve Chairman Kevin Warsh keeping interest rates steady as of now, the focus has now shifted to the non-farm payroll report for July to gauge an idea of the future stock market direction. Amid the vagaries of the market, 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, like Sandisk Corporation SNDK, Carpenter Technology Corporation CRS and Amkor Technology, Inc. AMKR, 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. 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.

Momentum strategies have been known to be alpha-generative over a long period and across market stages. Therefore, this strategy is quite tricky to implement, as detecting these trends is not easy. 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 long-term price momentum and a short-term pullback in price.

Screening Parameters for Momentum Anomaly Stocks

Percentage Change in Price (52 Weeks) = Top #50: This selects the top 50 stocks with the best percentage price change over the last 52 weeks. This parameter ensures we get the best stocks that have appreciated steadily over the past year.

Percentage Change in Price (1 Week) = Bottom #10: From the above 50 stocks, we then choose those that are also among the 10 worst performers over a short one-week period. This parameter picks the ones that have witnessed a short-term pullback in price.

Zacks Rank #1: Stocks sporting a Zacks Rank #1 (Strong Buy) have a proven history of outperformance irrespective of the market conditions. You can see the complete list of today’s Zacks #1 Rank stocks here.

Momentum Style Score of B or Better: A top Momentum Style Score knocks out a lot of the screening process, as it takes into account several factors that include volume change and performance relative to its peers. It indicates when the timing is best to grab a stock and take advantage of its momentum with the highest probability of success. Stocks with a Momentum Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), handily outperform other stocks.

Current Price Greater Than $5: The stocks must all be trading at a minimum of $5.

Market Capitalization = Top #3000: We have chosen stocks that are among the top 3000 in terms of market value to ensure the stability of price. 

Average 20-Day Volume Greater Than 100,000: A substantial trading volume ensures that these stocks are easily tradable.

Here are three of the five stocks that made it through this screen:

Milpitas, CA-based Sandisk develops, manufactures and sells data storage devices and solutions based on NAND flash technology. The portfolio spans solid-state drives, embedded products, removable cards, USB drives and wafers and components.

The stock has soared a stellar 2,839.3% over the past year but lost 15.4% over the past week. Sandisk has a Momentum Score of B. 

Philadelphia, PA-based Carpenter Technology is a producer and distributor of premium specialty alloys, including titanium alloys, powder metals, stainless steels, alloy steels and tool steels as well as drilling tools. The company is a leader in premium specialty alloys, including titanium, nickel and cobalt, as well as alloys specifically engineered for additive manufacturing processes and soft magnetics applications.

The stock has surged 101.6% over the past year but declined 13.9% over the past week. Carpenter Technology has a Momentum Score of A.

Tempe, AZ-based Amkor is a leading outsourced semiconductor assembly and test service provider. The company packages and tests integrated circuits for customers across smartphones, data centers, artificial intelligence, automotive, industrial and consumer devices.   

The stock has surged 129.3% in the past year but declined 23.2% in the past week. Amkor has a Momentum Score of A.

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This article originally published on Zacks Investment Research (zacks.com).

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