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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 (%)
CARDTRONICS INC CATM 1 240 8.05 95.37 350
COCA-COLA ENTRP CCE 1 31.37 20.9 100 300
EXPEDIA INC EXPE 1 25.93 22.77 99.35 33.33
SOURCEFIRE INC FIRE 1 200 19.35 95.5 42.86
FIRST LONG IS FLIC 1 146.34 29.5 99.91 35
GYMBOREE CORP GYMB 1 7.89 45.14 98.6 4.23
CENTRAL GARDEN CENT 1 51.72 13.03 96.94 51.61
CLEARWATER PAPR CLW 1 83.13 47.59 98.79 240
CORE-MARK HLDG CORE 1 80.95 29.43 98.06 52.94
COMP SCIENCE CSC 1 45.1 49.76 99.5 3.4
COGNIZANT TECH CTSH 1 27.03 35.44 97.6 2.7
DELUXE CORP DLX 1 3.64 17.25 98.27 47.37
DR PEPPER SNAPL DPS 1 24 26.86 95.25 23.33
EMERGENCY MEDIC EMS 1 28.85 46.16 100 14.29
EVERCORE PARTNR EVR 1 100 25.3 100 400
PRICELINE.COM PCLN 1 11.73 156.36 97.55 17.81
PATNI COMPUTER PTI 1 60.71 17.41 99.65 21.05
PERFECT WORLD PWRD 1 27.87 38.73 95.77 23.4
ROCK-TENN CO RKT 1 61.8 51.58 100 3.03
ROSS STORES ROST 1 N/A 46.67 97.46 N/A
STANDARD MOTOR SMP 1 92.86 12.9 100 16.67
SXC HEALTH SOL SXCI 1 152.38 43.7 100 123.53
TREEHOUSE FOODS THS 1 38.89 37.8 96.93 13.89
TRANSMONT'N PTNRS TLP 1 31.11 27.18 100 14.63
WORLD FUEL SVCS INT 1 25.64 46.16 95.5 16.46
IMPAX LABORATRS IPXL 1 66.67 7.77 100 171.43
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
LIFE TECHNOLOGS LIFE 1 19.7 45.45 96.36 19.64
STARLIMS TECH LIMS 1 233.33 8.7999 97.72 300
LENDER PROC DVC LPS 1 23.88 35.3 100 4.92
LUBRIZOL CORP LZ 1 N/A 62.49 100 N/A
NEWMARKET CORP NEU 1 57.23 84.65 98.24 70.91
INERGY HLDGS LP NRGP 1 100 44.34 95.84 43.06
NBTY INC NTY 1 78 37.1 97.86 12.12
NVR INC NVR 1 67.24 690.95 100 30.74
WESTERN DIGITAL WDC 1 181.48 34.81 100 172.73
WRIGHT EXPRESS WXS 1 42.5 30.6 99.96 61.54
TNS INC TNS 1 27.27 27.16 97.98 70.59
TRIQUINT SEMI TQNT 1 500 7.24 97.37 9.09
TUPPERWARE BRND TUP 1 40.98 37.4 98.57 32.35
UNIVL FST PRODS UFPI 1 93.02 43.79 95.63 71.43
VALSPAR CORP VAL 1 26.42 27 98.13 2.86
Source: A High-Ranked Momentum Stock Portfolio