The last month of the first quarter witnessed U.S. stock markets tumble on concerns of a global economic recession due to the coronavirus pandemic. The outbreak of this deadly virus has been triggering significant volatility in global stock markets for the last six weeks.
However, last week (ended Mar 27), Wall Street witnessed one of its best weekly performances in its history. The trend continued in the first trading day of this week.
Momentum Likely to Continue
A handful of stocks have withstood the market mayhem in March, some of them are momentum players. Momentum investing calls for a continuous appraisal of stocks, which ensures that an investor does not pick a beaten-down name and overlook a thriving one. Momentum investors buy high on the anticipation that the stock will only ascend in the short to intermediate term.
The recent stock market upsurge may present an ideal buying opportunity for momentum investors. The market has been so oversold in the past five weeks that even a bad news, except for the worst case scenario, will not deter market participants from buying good stocks at an attractive valuation.
The three major stock indexes — the Dow, the S&P 500 and the Nasdaq Composite — tumbled 23.6%, 21.7% and 20.1%, respectively, from their all-time highs recorded last month. Month to date, these indexes — the Dow, the S&P 500 and the Nasdaq Composite — are down 12.1%, 11.1% and 9.3%, respectively, despite the ongoing rally.
Upward Revision of EPS Estimates - A Crucial Indicator
An upward earnings per share (EPS) estimate revision for 2020 of any stock simply means the market is expecting these companies to do good business this year. However, in the past 30 days most stocks witnessed either negative EPS revisions or remained flat due to coronavirus pandemic.
Meanwhile, a positive EPS estimate revision during the period of historic financial turmoil highlights solid business model and robust growth potential of these companies. Investors can certainly take a look at these stocks currently as these have strong earnings momentum.
Our Top Picks
We have narrowed down our search to five momentum stocks that have moved north in March. All these stock witnessed robust earnings estimate revisions in the last 30 days and have solid growth potential. Each of our picks carry a Zacks Rank #1 (Strong Buy) and a Momentum Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks in the past month.
Grocery Outlet Holding Corp. GO owns and operates a chain of grocery stores primarily in the United States. The company has an expected earnings growth rate of 12.7% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 9.9% over the past 30 days.
Sprouts Farmers Market Inc. SFM operates as a healthy grocery store, provides fresh, natural and organic food products in the United States. The company has an expected earnings growth rate of 4.8% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 4.8% over the past 30 days.
PLDT Inc. PHI operates as a telecommunications company in the Philippines. The company operates in three segments: Wireless, Fixed Line, and Others. The company has an expected earnings growth rate of 14.9% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 10.6% over the past 30 days.
Regeneron Pharmaceuticals Inc. REGN is a biopharmaceutical company focused on the discovery, development and commercialization of treatments targeting serious medical conditions. The company has been in the news for making progress in developing treatment for COVID-19. The company has an expected earnings growth rate of 16.2% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 0.2% over the past 30 days.
The Clorox Co. CLX manufactures and markets consumer and professional products worldwide. It operates through four segments: Cleaning, Household, Lifestyle and International. The company has an expected earnings growth rate of 1.6% for the current year. The Zacks Consensus Estimate for current year earnings has improved by 3.7% over the past 30 days.
(We are reissuing this article to correct a mistake. The original article, issued on Mar 31, 2020, should no longer be relied upon.)
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