Momentum investing is essentially the opposite of the tried-and-tested Wall Street adage -- "buy low and sell high." Investors following this investing style typically avoid betting on cheap stocks and waiting long for them to recover. They believe instead that one could make far more money in lesser time by "buying high and selling higher."
Who doesn't like betting on fast-moving trending stocks? But determining the right entry point isn't easy. Often, these stocks lose momentum once their valuation moves ahead of their future growth potential. In such a situation, investors find themselves loaded up on expensive shares with limited to no upside or even a downside. So, going all-in on momentum could be risky at times.
It could be safer to invest in bargain stocks that have been witnessing price momentum recently. While the Zacks Momentum Style Score (part of the Zacks Style Scores system), which pays close attention to trends in a stock's price or earnings, is pretty useful in identifying great momentum stocks, our 'Fast-Paced Momentum at a Bargain' screen comes handy in spotting fast-moving stocks that are still attractively priced.
US Foods (USFD) is one of the several great candidates that made it through the screen. While there are numerous reasons why this stock is a great choice, here are the most vital ones:
A dash of recent price momentum reflects growing interest of investors in a stock. With a four-week price change of 4.5%, the stock of this company is certainly well-positioned in this regard.
While any stock can see a spike in price for a short period, it takes a real momentum player to deliver positive returns for a longer time frame. USFD meets this criterion too, as the stock gained 11.3% over the past 12 weeks.
Moreover, the momentum for USFD is fast paced, as the stock currently has a beta of 1.68. This indicates that the stock moves 68% higher than the market in either direction.
Given this price performance, it is no surprise that USFD has a Momentum Score of B, which indicates that this is the right time to enter the stock to take advantage of the momentum with the highest probability of success.
In addition to a favorable Momentum Score, an upward trend in earnings estimate revisions has helped USFD earn a Zacks Rank #2 (Buy). Our research shows that the momentum-effect is quite strong among Zacks Rank #1 and #2 stocks. That's because as covering analysts raise their earnings estimates for a stock, more and more investors take an interest in it, helping its price race to keep up. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>
Most importantly, despite possessing fast-paced momentum features, USFD is trading at a reasonable valuation. In terms of Price-to-Sales ratio, which is considered as one of the best valuation metrics, the stock looks quite cheap now. USFD is currently trading at 0.43 times its sales. In other words, investors need to pay only 43 cents for each dollar of sales.
So, USFD appears to have plenty of room to run, and that too at a fast pace.
In addition to USFD, there are several other stocks that currently pass through our 'Fast-Paced Momentum at a Bargain' screen. You may consider investing in them and start looking for the newest stocks that fit these criteria.
This is not the only screen that could help you find your next winning stock pick. Based on your personal investing style, you may choose from over 45 Zacks Premium Screens that are strategically created to beat the market.
However, keep in mind that the key to a successful stock-picking strategy is to ensure that it produced profitable results in the past. You could easily do that with the help of the Zacks Research Wizard. In addition to allowing you to backtest the effectiveness of your strategy, the program comes loaded with some of our most successful stock-picking strategies.
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Free Report: 5 Clean Energy Stocks with Massive Upside
Energy is the backbone of our economy. It’s a multi-trillion dollar industry that has created some of the world’s largest and most profitable companies.
Now state-of-the-art technology is paving the way for clean energy sources to overtake “old-fashioned” fossil fuels. Trillions of dollars are already pouring into clean energy initiatives, from solar power to hydrogen fuel cells.
Emerging leaders from this space could be some of the most exciting stocks in your portfolio.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
