Since we have already examined in previous posts the potential for momentum strategies either using moving averages, 52 week or all-time highs (for more posts on those strategies click here or here), or returns over the past year, I thought the readership of the Scott's Investments blog may prefer a twist. I have partnered with Zacks Investment Research to start providing some additional screens to my readers. So, using the stock screener in Zacks Premium service, I've screened for stocks trading within 5% of their 52 week high (in other words, strong momentum) and also having positive earnings surprises the past two quarters, and also having the highest rating from Zacks, a 1. (Zacks ranks stocks on a scale of 1-5, with 1 being a 'strong buy' and 5 being 'strong sell'; the Zacks #1 Rank List has generated an annual average return of 27% since 1988.)
One idea I had was to only purchase the top rated stocks if the underlying index (S&P 500) was trading above a long term moving average such as the 200 day moving average. This could potentially reduce some upside gains, but could also reduce drawdowns, such as happened in 2008.
My screen results are below. There are a lot of results, primarily because the market as a whole is trading on strong momentum; I would expect in future months this list may shrink. The average investor would not need to hold 45 stocks, but it may be possible to dwindle this list by adding additional search criteria and/or simply picking a small basket of stocks from within the list. In addition, one could overweight stocks in sectors that have the strongest momentum, or only purchase stocks in the strongest sectors (such as the list compiled here, which I update monthly).
|Company Name||Ticker||Zacks Rank||Last EPS Surprise (%)||Current Price||Price as % of 52-Wk High||Previous EPS Surprise (%)|
|FIRST LONG IS||FLIC||1||146.34||29.5||99.91||35|
|DR PEPPER SNAPL||DPS||1||24||26.86||95.25||23.33|
|SXC HEALTH SOL||SXCI||1||152.38||43.7||100||123.53|
|WORLD FUEL SVCS||INT||1||25.64||46.16||95.5||16.46|
|JO-ANN STORES A||JAS||1||66.67||27.84||95.22||172.73|
|JOHN BEAN TECH||JBT||1||54.17||17.65||95.24||46.15|
|J CREW GROUP||JCG||1||209.09||32.76||100||25.93|
|J&J SNACK FOODS||JJSF||1||23.08||44.22||100||56|
|LENDER PROC DVC||LPS||1||23.88||35.3||100||4.92|
|INERGY HLDGS LP||NRGP||1||100||44.34||95.84||43.06|
|UNIVL FST PRODS||UFPI||1||93.02||43.79||95.63||71.43|