Momentum Investing and the Momentum Style Score
Momentum investing is a strategy that involves following a stock’s recent trend in either direction, with the goal of taking advantage of its momentum to generate timely and profitable trades. This approach is based on the idea that once a stock establishes a course, it is more likely to continue moving in that direction. The key to successful momentum investing lies in identifying stocks that are exhibiting strong price movements and have a high likelihood of continuing their trend.
However, defining momentum can be challenging, as there are various metrics that can be used to gauge a stock’s momentum. Some investors may focus on short-term price activity, such as daily or weekly price changes, while others may consider longer-term trends, including monthly or quarterly performance. Additionally, some analysts believe that certain industry-specific metrics, such as earnings estimate revisions, can also provide valuable insights into a stock’s momentum.
To help address these challenges and provide investors with a more comprehensive understanding of a stock’s momentum, the Zacks Momentum Style Score was developed as part of the Zacks Style Scores system. This score combines multiple factors, including price change and earnings estimate revisions, to generate a single numerical value that reflects a stock’s momentum.
The Case for AngioDynamics (ANGO)
One stock that stands out in terms of its strong momentum is AngioDynamics (ANGO), a medical device maker with a Momentum Style Score of B. This score indicates that ANGO has exhibited a relatively high level of price movement and earnings estimate revisions over the past few months, making it an attractive candidate for momentum investors.
To begin evaluating ANGO’s momentum, let’s examine its short-term price activity. Over the past week, ANGO shares have increased by 7.94%, outperforming the Zacks Medical – Instruments industry, which has seen a gain of only 0.37% over the same period. When compared to the S&P 500 index, which has moved 2.37% over the past year, ANGO’s price growth is even more impressive.
In addition to short-term price activity, it is also essential to consider longer-term trends when evaluating a stock’s momentum. For ANGO, shares have gained 71.09% in the last year, significantly outperforming the S&P 500 and its peers within the Medical – Instruments industry. This level of price growth suggests that investors are increasingly confident in ANGO’s prospects, driving up demand for its shares.
Another key aspect of momentum investing is trading volume. Investors should look for stocks with above-average volume, as this can indicate a strong trend and increasing investor interest. In ANGO’s case, the company has seen an average 20-day trading volume of 535,625 shares, which is higher than usual for the stock.
Earnings Estimate Revisions
In addition to price movement and trading volume, earnings estimate revisions are also a crucial component of the Momentum Style Score. Investors should note that ANGO’s consensus estimate has recently been revised upward, from -$0.36 to -$0.29 in the past 60 days, with two estimates moving higher compared to none lower for the full year.
Looking ahead, the next fiscal year’s earnings estimates have also seen an increase, with two revisions upwards and no downward revisions in the same time period. This level of optimism among analysts suggests that ANGO has a high likelihood of meeting or exceeding expectations, driving up its stock price in the near term.
Conclusion
In conclusion, AngioDynamics (ANGO) is a compelling momentum pick due to its strong price movement, earnings estimate revisions, and trading volume. With a Momentum Style Score of B and a Zacks Rank of #1 (Strong Buy), ANGO stands out as a stock with significant potential for growth in the near future. As investors continue to seek momentum stocks that are set to rise in the coming weeks or months, ANGO is certainly worth considering for inclusion on their short lists.
Investor Takeaways
- Momentum investing involves following a stock’s recent trend to generate timely and profitable trades.
- The Zacks Momentum Style Score combines multiple factors, including price change and earnings estimate revisions, to provide a comprehensive picture of a stock’s momentum.
- AngioDynamics (ANGO) has a Momentum Style Score of B and a Zacks Rank of #1 (Strong Buy), making it an attractive candidate for momentum investors.
- ANGO’s short-term price activity has been strong, with shares increasing 7.94% over the past week and 71.09% in the last year.
- The company’s earnings estimate revisions have also been positive, with two estimates moving higher compared to none lower for the full year.
By carefully evaluating these factors, investors can gain a deeper understanding of ANGO’s momentum and make more informed decisions about its potential for growth.