Are You a Momentum Investor? This 1 Stock Could Be the Perfect Pick

Whether you are a seasoned investor or just starting out, making the most of the stock market is a common goal for everyone. The good news is that there are resources available to help you invest more confidently and effectively.

One such resource is Zacks Premium, which provides a variety of tools to enhance your investment strategy. By utilizing this popular research service, you gain access to daily insights including the Zacks Rank, Zacks Industry Rank, the Zacks #1 Rank List, Equity Research reports, and Premium stock screens.

Included in Zacks Premium are the Zacks Style Scores.

Understanding the Zacks Style Scores

The Zacks Style Scores are a distinctive set of criteria that evaluate stocks based on three popular investment approaches. These scores serve as complementary tools to the Zacks Rank, helping investors select stocks with the highest potential for outperforming the market in the short term.

Each stock receives an alphabetic grade from A to F based on its value, growth, and momentum characteristics. A higher score indicates a greater likelihood of market success, with an A being superior to a B, and so forth.

The Style Scores consist of four main categories:

Value Score

Value investors focus on identifying stocks priced attractively relative to their actual worth. The Value Style Score evaluates metrics like P/E ratio, PEG ratio, and other financial multiples to highlight undervalued stocks.

Growth Score

Growth investors prioritize a company’s future potential and overall financial health. The Growth Style Score assesses factors such as earnings projections and cash flow to identify stocks expected to grow sustainably over time.

Momentum Score

Momentum investing hinges on capitalizing on prevailing trends in stock prices and earnings estimates with the belief that “the trend is your friend.” The Momentum Style Score indicates optimal entry points for stocks, factoring in recent price changes and fluctuations in earnings estimates.

VGM Score

For those who want to encompass all three investment styles, the VGM Score integrates the Value, Growth, and Momentum Scores. This comprehensive score helps investors to pinpoint stocks exhibiting attractive value, promising growth, and strong momentum.

How the Style Scores Complement the Zacks Rank

The Zacks Rank is a proprietary model that harnesses the power of earnings estimate revisions to help investors build successful portfolios. It has a strong track record, with #1 (Strong Buy) stocks returning an exceptional average annual return of +25.41% since 1988, more than twice the return of the S&P 500.

With thousands of stocks rated daily, over 200 typically receive a Strong Buy ranking, alongside roughly 600 rated as #2 (Buy). This results in an extensive list of top-rated stocks, making it challenging to identify the best choices for your portfolio.

This is where the Style Scores play a critical role.

To optimize returns, investors should aim to select stocks with a Zacks Rank of #1 or #2, coupled with Style Scores of A or B. If evaluating stocks with a #3 (Hold) rank, it’s beneficial for them to also have high Style Scores to maximize upside potential.

When choosing stocks, consider the direction of earnings estimate revisions. Stocks assigned a #4 (Sell) or #5 (Strong Sell) rank should generally be avoided, even if they possess decent Style Scores, as they typically face negative earnings forecasts.

Therefore, owning more stocks with a #1 or #2 Rank and high Style Scores reflects better fundamental strength in your portfolio.

Featured Stock: Lyft (LYFT)

Founded in 2012 and headquartered in San Francisco, CA, Lyft made its stock market debut on Nasdaq in March 2019, priced at $72 per share. The company completed its IPO offering 32.5 million shares of Class A common stock.

Currently, LYFT holds a Zacks Rank of #2 (Buy) along with a VGM Score of A.

For those interested in momentum investing, LYFT stands out with a Momentum Style Score of A, witnessing an impressive rise of 11.4% in its share price over the past month.

In the last 60 days, one analyst raised their earnings estimate for fiscal 2024, while the Zacks Consensus Estimate climbed by $0.05 to $0.79 per share. LYFT also boasts an average earnings surprise of 78.8%, showcasing its potential for strong performance.

Given its solid Zacks Rank and favorable Momentum and VGM Style Scores, LYFT is a stock worth considering for those looking to enhance their investment portfolio.

investment, stocks, momentum