3 Momentum Anomaly Stocks to Buy as Markets Bask in Tech Rally
Despite intermittent conflicts amid the U.S.-Iran ceasefire, the broader U.S. equity markets are witnessing a dream run of late, driven by a tech rally. Leading benchmark indices have been charting fresh record highs on almost every trading day amid renewed enthusiasm in the AI trade, eclipsing a below-par performance from the majority of other sectors. The tech rally was further buoyed by a positive bilateral meeting between President Trump and his counterpart in China, with initial media reports suggesting that Washington has approved the sales of Nvidia’s H200 chip to 10 China-based firms.
The uptrend was briefly punctured by a hotter-than-expected U.S. consumer inflation data for April, which revealed that wholesale inflation gained 6% on an annual basis — the largest increase since December 2022 — and the consumer price index rising 0.6%, putting the annual inflation rate at 3.8%. However, the market was quick to reverse the trend as tech stocks spurred an unprecedented rally. 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 Albemarle Corporation ALB, FormFactor, Inc. FORM and International Seaways, Inc. INSW 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 six stocks that made it through this screen:
Charlotte, NC-based Albemarle is a premier specialty chemicals company with leading positions in attractive end markets globally. It is a leading producer of highly-engineered specialty chemicals geared to meet customer requirements across a bevy of end markets, including petroleum refining, consumer electronics, energy storage, construction and automotive.
The stock has soared 216.8% over the past year but lost 3.7% over the past week. Albemarle has a Momentum Score of A.
Livermore, CA-based FormFactor is a leading provider of electrical and optical test and measurement technologies along the full semiconductor product lifecycle – from characterization, modeling, reliability and design debug, to qualification and production test. The company’s product portfolio comprises high-performance probe cards, analytical probes, probe stations, thermal systems and cryogenic systems.
The stock has surged 290% over the past year but lost 11.5% over the past week. FormFactor has a Momentum Score of A.
Headquartered in New York, NY, International Seaways is one of the largest public tanker companies in the world, providing seaborne transportation services for crude oil and refined petroleum products. The company owns and operates a fleet across the principal tanker asset classes, focusing on the safe and reliable operation of its fleet.
The stock has jumped 123.3% in the past year but declined 5.2% in the past week. International Seaways has a Momentum Score of A.