Zacks.com featured highlights include: United Parcel Service, Fair Isaac Corp and National Beverage Corp
For Immediate Release
Chicago, IL – October 30, 2020 – Stocks in this week’s article are United Parcel Service, Inc. UPS, Fair Isaac Corporation FICO and National Beverage Corp. FIZZ.
3 Momentum Anomaly Stocks to Build a Resilient Portfolio
Volatility is not something new to Wall Street. It’s part of investing. But, of late, factors such as the spike in coronavirus cases globally and a failure to reach a deal on a fresh round of fiscal stimulus before the Nov 3 election have led investors to panic selling.
We must remember that reacting hastily to volatile trends can cause more damage to one’s portfolio returns than an actual downturn. The secret to making money, regardless of market conditions, is to buy stocks that have been burned but still have the potential to soar.
When value or growth investing fails to fetch sustained profits, one should explore another time-tested winning strategy that simply bets on frontrunner stocks. One of the most successful strategies today is to get in on momentum stocks at the right time.
At the core, momentum investing is buying high, selling higher. It is based on the idea that once a stock establishes a trend, it is more likely to continue in that direction than move against the drift. But why does the momentum strategy work?
There’s a whole laundry list of behavioral biases that most investors exhibit and these emotional responses and mistakes are the very reason that momentum strategy works. For instance, some investors are anxious about booking losses and hence hold on to losing stocks for too long, hopeful of a rebound in prices. Meanwhile, a few investors sell their winners way too early.
Furthermore, investors initially tend to underreact to news, events or data releases. However, once things become clear, they tend to go with the flow and overreact, causing dramatic price reactions.
These behavioral problems extend trends, thus opening up huge opportunities for momentum players. So basically, it’s a way to profit from the general human tendency to extrapolate current trends into the future.
Momentum investing is thus based on that gap in time that exists 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. So obviously, this strategy is quite tricky to implement, as detecting these trends is no child’s play.
Here, we have created a strategy that will help investors get in on these fast movers and rake in handsome gains. Our screen will help you benefit from both long-term price momentum and a short-term pullback in price.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/1091458/3-momentum-anomaly-stocks-to-build-a-resilient-portfolio
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
National Beverage Corp. (FIZZ) : Free Stock Analysis Report
Fair Isaac Corporation (FICO) : Free Stock Analysis Report
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